Developing an Energy Efficiency Standard for Social Housing: consulation analysis

1 Executive Summary

Key findings

• There were 86 responses to the consultation: 49% from the housing association sector, 26% from the local authority sector, 12% from the private sector; 10% from other organisations; and 3% from individuals. The housing association, local authority and individual respondents typically answered all/most of the questions in the consultation.
• Sixty-four per cent of all respondents (76% of those answering the question) thought that improving energy efficiency was a priority for tenants. In particular, respondents thought that tenants were concerned about rising fuel prices and affordable warmth at home.
• Seventy-four per cent of all respondents (90% of those answering the question) considered the modelled case studies helpful, and 65% of respondents (85% of local authorities and 71% of housing associations) felt that additional case studies covering other house types, including hard to treat, multi storeys, and non-traditional properties, would also be useful.
• Fifty per cent of all respondents (72% of those answering the question) felt that the further measures indicated for EESSH for 2020 and advanced measures indicated for EESSH for 2050 were realistic and achievable, although some difficulties might be encountered (typically in off-gas areas and conservation areas/listed buildings).
• Only 37% of respondents agreed with the proposal to adopt an Environmental Impact ( EI) measure of energy efficiency (that is, 46% of those answering the question). Many preferred the Energy Efficiency ( EE) rating, which has been used for Scottish Housing Quality Standard ( SHQS); it was familiar to landlords, and was considered relevant to tenants' concerns about energy use and fuel costs.
• Fifty-nine per cent of respondents considered the ratings targets set for the main property types suitably challenging, with many noting that the 2020 measures were reasonable, achievable and affordable. However, only 22% of all respondents (33% of those answering the question) agreed with the suggested target proposed for unusual properties, with many respondents concerned that the target would be unaffordable.
• Fifty-six per cent of all respondents (81% of those answering the question) were of the view that, given the sources of funding available, the standard could not be achieved at a reasonable cost. Key concerns were about unusual stock types, multi-storey flats, properties in off-gas areas, and properties in listed buildings/conservation areas. Concerns were also expressed about levels of funding and changes in the structure of funding (from grants to loans, and from payments to landlords to payments to householders), that served to increase uncertainty.
• Fifty per cent of all respondents (75% of those answering the question) would welcome the Scottish Housing Regulator ( SHR) monitoring the standard. This was seen as a continuation of the role currently undertaken with respect to the SHQS. Forty-eight per cent of all respondents (82% of those answering the question) identified additional costs associated with monitoring: typically staff costs, IT systems and development and maintenance of databases. There was a view among many respondents that, unlike the SHQS, the standard would require a 100% stock database though some respondents had undertaken/planned to undertake a 100% stock survey and had a viable asset management database. Several respondents suggested reviewing this requirement and/or considering the option of permitting cloned data, at least in the interim.
• Fifty-nine per cent of all respondents (93% of those answering the question) agreed with proposals to set regular milestones to measure progress towards 2050. Typically respondents agreed that these milestones should be set every ten years; with the possibility of additional milestones in the run up to 2050 if progress towards the target was poor. Fifty-six per cent of all respondents (80% of those answering the question) agreed that the setting of the longer-term milestones should be deferred until progress towards 2020 can be reviewed. However, a number of respondents considered that the interim milestones should be set as soon as possible to facilitate long-term business planning.

Context

1 The consultation, which ran until 28 ^th September 2012, sought views on the Energy Efficiency Standard for Social Housing (the standard). This is part of the Government's wider Sustainable Housing Strategy ( SHS) which aims to provide for warm, high quality, low carbon homes, and contribute to the establishment of a successful low carbon economy. The standard is designed to improve the energy efficiency of social housing and so help reduce energy consumption, fuel poverty and the emission of greenhouse gases.

2 The proposed standard is to establish a minimum Energy Performance Certificate ( EPC) rating. The government proposes this will be the Environmental Impact ( EI) score, and will be different for different dwelling types and fuel types.

Profile of responses

3 A total of 86 responses was received to the consultation, in line with expectations. Most of the responses were from local authorities and housing associations. The other responses were from the private sector, the third sector, representative bodies, other organisations and individuals. Typically, the views expressed in the consultation reflect this general profile of respondents. For the sake of brevity in the reporting, we have only highlighted significant variations from this pattern.

Results of the Consultation

Why is a new standard necessary?

4 This chapter looks at the rationale for introducing a new energy efficiency standard, issues related to occupiers and private rented housing, and the benefits to tenants from encouraging energy efficient behaviour. It starts by addressing the experience that social landlords already have of undertaking energy efficiency measures and acting as 'pioneers' in the field.

5 As might be expected, social landlords have wide-ranging experience of implementing energy efficiency measures in their stock: from adopting high eco standards and including renewables in their new build developments; using high grade and innovative products during improvement programmes; and piloting the use of renewable energy sources.

6 The target date for achieving the SHQS is 2015. However, it may be the case that not all the stock will be improved by then. Some stock, such as traditional stone tenements, some non-traditional stock and properties in listed buildings/conservation areas are proving disproportionately expensive to improve. Landlords have also experienced difficulties completing improvements in mixed tenure blocks, where owners have withheld consent to works on common parts, especially where the works are disruptive and/or expensive relative to the resale/rental value. Landlords are working hard to resolve these issues, engaging actively with owners, providing information and advice, developing funding packages, and so on.

7 The new standard was generally considered relevant to tenants. Most respondents considered that tenants were concerned about rising fuel costs and affording to be comfortably warm at home. However, there were mixed views as to whether tenants would prioritise improving energy efficiency measures: whether they would appreciate the relationship between the measures and reduced energy bills; whether they would use the heating systems well enough to generate savings; and whether any rent increases which might be required to fund the improvements would cancel out any benefits. There were also mixed views as to whether any particular equality group would be disadvantaged by the new standard. Generally respondents thought not, although there were some concerns that some older people and people with disabilities may find the increasingly complex heating systems difficult to use and would need much greater support. There were also some concerns that those on low incomes might be adversely affected by rent increases, should they be necessitated by the improvements.

8 A range of measures were suggested to both improve energy efficiency awareness and to help tenants better manage their energy consumption, often based on the respondents' experience of delivering services in-house or in partnership with specialist agencies. These measures covered provision of information, advice and advocacy, awareness raising and use of smart meters and smart controls. It was suggested by some that government and other agencies should provide the bulk of the information and advice as a service to the general public.

Developing the standard

9 This chapter looks at how the standard has been developed; the research, modelling work and methodology used; and dealing with hard/expensive to treat properties.

10 A set of 23 case studies covering the main social rented sector property types, each modelling four scenarios (a 1990 baseline, measures likely to be installed to meet the SHQS in 2015, further measures at 2020 and advanced measures at 2050) has been produced, with work underway to produce others covering some other property types. The vast majority of respondents considered these case studies helpful; they will provide useful information on the benefits of energy efficiency improvements and inform investment decisions. Generally respondents felt that the right range of property types had been covered by the case studies, but would like further case studies to provide similar information on non-traditional properties (especially no fine concrete constructions), hard-to-treat properties, multi-storeys and timber-frame properties. In addition, case study modelling of properties using different fuel types and subject to planning restrictions (listed/conservation areas) was sought.

11 Views were mixed on whether the 1990 baseline was accurate or not: most respondents commented that they did not have sufficient information to assess it. Some were content to accept it in the absence of anything better; others were less so (often because local experience would suggest the baseline was set too high). Respondents were generally in agreement with the proposed improvements set out in the case studies for 2020 and 2050. The majority of respondents consider these to be reasonable and feasible, although some note they would have to be assessed further locally in terms of their affordability. However, their feasibility in some particular circumstances (for example, listed buildings/conservation areas and off-gas areas) was considered doubtful.

12 On the whole respondents agreed with the proposal to use the SAP/ RdSAP methodology for regulating energy performance. Many landlords have invested in the approach for the SHQS and have already built up an EPC databank, so the continuity was particularly welcomed. A number of improvements to the approach were requested to address shortcomings that had been experienced: the assumptions should reflect local (Scottish) conditions; it should update more quickly to accommodate new technologies and tariffs; and measures must be taken to ensure smooth conversion between versions.

The proposed Energy Efficiency Standard for Social Housing

13 This chapter looks at the draft standard; the alternatives that have been considered, and the possible role of exceptions to the standard.

14 Only around a third (37% of all respondents, 46% of those answering the question) of the respondents agreed with the proposals to measure energy efficiency in terms of an Environmental Impact ( EI) score, which assessed the change in terms of carbon dioxide emissions. Instead, respondents generally preferred Energy Efficiency ( EE) ratings. These relate to energy use and cost and were therefore considered more relevant to tenants' priorities and were familiar to landlords from their work on the SHQS. Some measures to improve the EI may result in a deterioration of the EE. There was widespread agreement that a dwelling's current EE rating should be safeguarded so that improvement measures do not result in a decline in energy efficiency.

15 On the whole respondents did not foresee difficulties in obtaining the information required to measure progress against the standard. They are already familiar with the EPCs, which will contain the necessary information; and have built up databases to inform the SHQS. However, these databases typically only cover a sample of the stock; and considerable resources will be required to complete a 100% database, were this required. Many respondents suggested that, at least in the interim, if not in the longer term, a sample and clone approach could be adopted.

16 Generally respondents considered the rating targets set for the main property types ¹ challenging but reasonable, achievable and affordable. A small number considered they were not particularly challenging and suggested slightly higher SAP ratings in order to ensure the 2050 target was achieved. And a small number felt they were extremely challenging, typically noting that a high proportion of their stock was hard to treat/off-gas/ etc. There was a mixed reaction to the proposed energy efficiency rating for electrically heated detached homes and bungalows, which is lower than that for the SHQS. Around a third of respondents (30%, or 43% of those answering the question) felt this rating undermined the SHQS, and commented that standards should be increasing, while around 40% supported the proposal (57% of those answering the question), commenting that it was pragmatic and did not preclude future improvements.

17 Generally respondents agreed that all social rented dwellings should be heated by mains gas, electricity or renewables by 2030. This was considered achievable in urban areas, but potentially problematic in rural areas where the costs of conversion and some tenants' preferences for solid fuel were likely to remain a barrier. Some respondents queried whether gas should be considered a sustainable fuel going forward.

18 Two alternatives to the standard had previously been considered and rejected. The consultation asked whether either of these should be reconsidered. Only 19% of respondents thought this would be worthwhile. Most of these thought there was merit in having a simple list of measures to be installed in properties. A few favoured a set minimum percentage reduction in the property's energy efficiency rating.

19 Respondents largely agreed that the standard should apply to individual homes, rather than be aggregated across the landlord's stock. It was considered that this approach would ensure that all tenants would benefit from improved energy efficiency measures and prevent landlords focusing their efforts on the easy to improve stock. Some respondents suggested an aggregate approach may be necessary for an interim period.

20 Respondents generally agreed with the proposed methodology for the stock not covered by case studies (typically harder or more expensive to treat properties). It was felt that the proposed approach was practical and reasonable, although it could be resource intensive/impractical for landlords with a substantial number of hard-to-treat dwellings. There was not, however, a great deal of support for the proposal that the target percentage reduction be 42% (just 22% of all respondents, 33% of those answering the question). Respondents generally did not feel competent to suggest alternative percentage targets, but a number did suggest that the maximum economically viable reduction for the property would be reasonable.

21 Most respondents considered that exceptions to the standard would be required, although on the whole respondents indicated that these should be kept to a minimum and that landlords should be actively reducing/managing the exceptions they have. It was considered that most exceptions would apply to hard to treat properties and a combination of developing approaches designed to treat such properties, together with adequate funding, would be effective in minimising the number and extent of exceptions required. It was also noted that tenant and owner refusals could present some problems delivering the standard.

Financial implications - costs and funding sources

22 This chapter looks at the indicative cost of meeting the Energy Efficiency Standard; the potential funding streams available and the financial benefits.

23 The consultation document provides a list of the main sources of funding available from the Scottish Government, the UK government and the EU to support energy efficiency work. Respondents generally agreed that this list was comprehensive, with the only other significant source of funding likely to be the landlords' own resources. Most respondents were of the view that, given the range of funds available, the standard could not be achieved at a reasonable cost. They stressed a number of critical uncertainties: in particular, the cost of achieving the standard (indeed, the ratings for potentially the most expensive properties, the hard to treats, have not yet been finalised), landlords have not yet produced cost projections for their own stock; while grant funding levels are not yet known and will be subject to on-going uncertainty at the local level as a result of the changes to the funding regimes.

24 Respondents generally welcomed Scottish Government's view that the retrofitting work required for the standard provides an opportunity to advance gender equality in the construction sector, although some tempered this by stressing it should not be at the expense of existing jobs in the sector. A range of measures was suggested, including initiatives designed to improve awareness of the opportunities, particularly among young people; initiatives to encourage more women to take up Modern Apprenticeships and other training; and a series of workplace measures.

Measuring and monitoring progress of the energy efficiency standard

25 This chapter looks at the Scottish Social Housing Charter and the potential role of the Scottish Housing Regulator ( SHR) and the available data sources for measuring progress towards the standard.

26 Most respondents agreed that the Home Energy Efficiency Database ( HEED), together with the Scottish House Condition Survey ( SHCS), and landlords' returns to the SHR are the main data sources available to monitor the standard.

27 The proposal that the SHR monitor the standard was generally welcomed by respondents. This would continue the approach operating for the SHQS and would avoid bringing in a new body to undertake the monitoring. Some concerns were raised about whether the SHR had sufficient technical expertise, although it was suggested this could be addressed; and some respondents were concerned that in the longer-term there was an inconsistency between the active monitoring perceived to be required by the standard and the risk-based performance management approach that the SHR has been adopting.

28 Respondents generally considered there were additional costs associated with monitoring. Typically these were: staff time for monitoring and training in new systems; IT costs in systems development and software; and data collection (as outlined above in paragraph 15).

Timescales for the energy efficiency standard

29 This chapter looks at further milestones for the standard.

30 The vast majority of respondents agree with proposals to set regular milestones to measure progress to 2050. Respondents typically favoured milestones set every ten years (as proposed in the consultation document) or, in some cases, every five years (as per the SHQS). It was suggested that the frequency of milestones may need to be increased towards 2050, particularly if progress to meeting the 2050 target is poor. Respondents also tended to agree that the setting of each milestone should be deferred until progress on the previous milestone could be reviewed. It was felt that this would result in realistic, challenging and achievable milestones; and would ensure that milestones took full account of new technologies and fuel price relativities. However, a number of respondents in their comments noted that the milestones were needed as soon as possible to inform long-term business planning, investment decisions and loan restructuring.

31 Finally, the consultation asked if there were any other opportunities within the Energy Efficiency Standard for Social Housing to promote equalities issues. Most respondents indicated that there were none they could think of, although there was potential for equal opportunities issues to arise so these should be actively monitored and addressed. A number of respondents highlighted the relationship between the standard and fuel poverty: it was suggested that further work on the potential impact of the standard on groups at risk of fuel poverty was required, together with a commitment to measures to address resultant disadvantage.