Homes that don't cost the earth: a consultation on Scotland's Sustainable Housing Strategy

Chapter 2: The Role of Standards

The outcome we want to see :

People value and take responsibility for the condition and energy efficiency of their homes, with an appropriate role for standards.

Why is this important?

2.1 For people to live in warm, high quality, low carbon homes by 2030, we need to consider what action is necessary to improve both the physical condition and the energy efficiency of housing.

2.2 Although there is no direct correlation in the Scottish House Condition Survey ( SHCS) statistics between disrepair, fuel poverty and energy efficiency across Scottish housing, it stands to reason that a house which is in disrepair may also be less energy efficient. For example, not only will a house with no loft insulation lose heat through a damaged roof, but even one where insulation is present could lose additional energy in heating damp insulation caused by a leaking roof.

2.3 It is therefore important that this Sustainable Housing Strategy presents not only a vision for improving the energy efficiency of existing houses, but also considers action to ensure that properties are well maintained to retain the benefit of energy efficiency measures and provide safe, quality homes for people to live in over the longer term.

2.4 This chapter seeks views on possible legislative amendments that could help improve private sector house condition and energy efficiency, particularly in tenements. It also highlights work being consulted on concurrently in relation to setting minimum standards for energy efficiency in the social sector. And, it seeks views on issues affecting the potential future use of minimum standards of energy efficiency in the private sector. As such, it will be relevant to a wide audience, including home owners, private rented sector landlords, social landlords and property factors.

2.5 Scottish Ministers stated in March 2011 that powers to set minimum standards for the energy efficiency of private sector housing would not be used before 2015, but the date at which they could be applied from is still to be determined. We propose to set up a working group by the end of the year, drawing on interests from a variety of backgrounds, which will fully consider if, how and when we might regulate, to encourage the reduction of greenhouse gas emissions and contribute to achieving climate change targets. The purpose of this consultation is to invite further steers on key issues which the working group will consider.

Work to date

2.6 The Sustainable Housing Strategy Group has considered papers ^[28] on a review of private sector house condition, and work to develop proposals for minimum standards for energy efficiency in both social and private sector housing.

2.7 Officials have also met with stakeholders on all of these issues and a dedicated working group has developed detailed proposals for an enhanced Energy Efficiency Standard for Social Housing.

Improving house condition

2.8 All social housing is required to meet the Scottish Housing Quality Standard ( SHQS) by 2015, which includes criteria about the standard and condition of accommodation. The Scottish Government believes that social landlords will be able to meet SHQS provided resources are targeted appropriately.

2.9 However, although the SHCS measures the SHQS for all properties in Scotland, there is no requirement that private sector housing meets this standard. The only requirement for owner occupied housing is that it meets the tolerable standard ^[29] , which is a minimum condemnatory standard which all housing must meet. Privately rented housing must also meet the repairing standard ^[30] .

Q11: Should the Scottish Government consider whether a single mandatory condition standard (beyond the tolerable standard) should apply to all properties, irrespective of tenure? If so, how would that be enforced?

2.10 The latest SHCS figures show that 60 per cent of private sector housing currently fails the SHQS, and 35 per cent has urgent disrepair. ^[31] Owners are responsible for looking after their properties, as set out in their title deeds, and local authorities have powers to take action where properties aren't being maintained, but the SHCS shows that levels of disrepair have not changed much over time.

2.11 In recognition of the importance of good basic house condition to energy efficiency, fuel poverty and general health issues, the Scottish Government carried out a short review of private sector housing, with input from the SHSG and a number of stakeholder groups. A paper summarising this review is available on the Sustainable Housing section of the Scottish Government website.

2.12 The review found four key issues, all of which could also apply to energy efficiency works:

• The need for a culture shift for owners to recognise the need to look after the condition of their homes.
• Particular problems of mixed and shared blocks.
• Difficulties faced by low income home owners.
• Levers for enforcement.

These issues informed the development of a draft Private Sector House Condition Action Plan. This is attached at Annex B .

2.13 One of the findings of the review was that owners are spending money on their properties, but that there is still significant disrepair. This may be due to cosmetic improvement being prioritised over necessary repair and maintenance work, as well as owners potentially paying less skilled tradespeople to carry out repairs which are in fact substandard repairs and do not sort the problem.

2.14 The Scottish Government will continue to call for a cut in VAT for repair and maintenance work to encourage owners to carry out work and use reputable tradespeople to try to address this issue. We also suggest the following hierarchy to help owners to prioritise how they invest in their properties, and would encourage owners to consider whether cost savings might be made by carrying out any necessary repair work at the same time as retrofit for energy efficiency.

Box 6: Looking after your home - a hierarchy of needs

Looking after your home: What is most important?

1. Make sure that your home is wind and watertight and that it is structurally sound; make sure that it stays that way by carrying out regular maintenance.
2. Make sure that work is done properly because poor quality repairs may be ineffective and can cost more in the long run.
3. Consider retrofitting appropriate insulation.
4. Make sure that your home is properly ventilated because this is essential to keep it healthy.
5. Review your boiler to ensure that it is efficient.
6. Ensure that points 1-5 have been addressed before considering microrenewable technology.

Q12: (a) In Box 6 we identify a checklist for maintaining a quality home. Do you agree with our proposed hierarchy of needs?

Please answer Yes or No.

(b) If you think anything is missing or in the wrong place please explain your views.

Local authority enforcement powers

2.15 The action plan identifies the need to consider whether the powers available to local authorities under the Housing (Scotland) Act 2006 are sufficient to enable them to encourage owners to take action on their properties This strategy takes the opportunity to seek views on some possible amendments that could be taken forward as part of the prospective Housing Bill.

Possible amendments to extend powers to require improvements

2.16 Local authorities have powers to provide assistance to repair and improve homes, and can also require that owners take action to repair or maintain their properties. But they cannot require that an owner undertakes only improvement works.

2.17 Improvements may required to communal areas, for example in mixed tenure blocks where social landlords are required to bring properties up to the Scottish Housing Quality Standard ( SHQS) by 2015. If agreement cannot be reached under the title deeds or Tenant Management Scheme ( TMS), then landlords may have to apply for abeyances, which means that tenants in those properties are not enjoying housing which meets the full SHQS. This could be in relation to fairly minor works, such as the replacement of a plain front door with one with security door entry, where that is seen as an improvement; or more substantial works relating to energy efficiency, for example where overcladding is required.

2.18 It is important that home owners are able to enjoy their properties, and that the requirements of the ECHR are met, but at the same time we would welcome views on whether it may be appropriate, in certain situations, to allow local authorities to require that owners improve their properties, for example in relation to energy efficiency works or to support the achievement of the SHQS in mixed tenure blocks. This could be implemented by, for example, extending the role of work notices so that specified improvement work could trigger a work notice.

Q13: Should local authorities be able to require that owners improve their properties, in the same way they can require that they repair them? For example, could poor energy efficiency be a trigger for a work notice?

Please answer Yes or No and provide further explanation if you wish, for example on how this might work.

Possible amendments to support decisions by owners in tenements

2.19 Under the TMS, decisions can be taken by a majority of owners in tenements to maintain and repair communal areas. Following an amendment made by section 69 of the Climate Change (Scotland) Act 2009, such decisions can cover the installation of insulation. The TMS is a default scheme which applies where nothing is laid down in the title deeds on how decisions should be taken or the deeds are uncertain.Local authorities have no enforcement role in implementing decisions taken under the TMS or the title deeds.

2.20 The Scottish Government is considering whether local authorities should have powers to enforce majority decisions agreed under title deed conditions or under the TMS by owners in a block. One option, for example, is the local authority paying any missing share, serving a notice on the owner to recover this money (and the authority's expenses) and, if the owner fails to pay up, registering a repayment charge.

Q14: Should local authorities have a power to enforce decisions taken by owners under the title deeds, Tenement Management Scheme or by unanimity? For example, should they have explicit powers to pay missing shares of owners who are not paying for communal repair work, in the same way they can for agreed maintenance work?

Please answer Yes or No and provide further explanation if you wish,

Possible amendments to existing powers requiring repair

2.21 Existing powers under the 2006 Act allow local authorities to enforce works to carry out repairs and maintenance needed to keep houses in good condition. This is important, both in maintaining the condition of the property itself, but also because the energy efficiency of houses may be reduced if they are in a poor state of repair. The following questions seek views on changes to improve the general effectiveness of the existing powers to enforce repair and maintenance work.

Q15: Should local authorities be able to automatically issue maintenance orders on any property which has had a work notice?
Please answer Yes or No and provide further explanation if you wish

Q16: Should the process for using maintenance orders be streamlined, and if so, how?
Please answer Yes or No and provide further explanation if you wish.

Q17: Should local authorities be able to
a. issue work notices on housing affecting the amenity, and
b. require work such as to improve safety and security on properties which are outwith a Housing Renewal area?
Please answer Yes or No and provide further explanation if you wish.

Q18: Should local authorities be able to issue repayment charges for work done on commercial properties, in the same way they can for residential premises?
Please answer Yes or No and provide further explanation if you wish.

Enforcement powers for empty homes

2.22 Currently around 70,000 homes in Scotland are empty. It is likely that many of these homes could be brought back into use as good quality affordable housing, private rented housing or for owner occupation with relatively small amounts of works to improve energy efficiency or carry out other repairs. Local authority enforcement powers can be used to require owners to deal with properties which are below tolerable standard or in serious disrepair. However, while these powers can tackle disrepair, they cannot make the owner bring the home back into use.

2.23 The Scottish Empty Homes Partnership works with local authorities to help them support and encourage owners to bring their homes back into use. We also intend to coordinate work on enforcement powers with the work of the Empty Homes Partnership to identify ways to use these powers to help bring more empty homes back into use in cases where the owner will not work with their local authority.

Property factors and switching

2.24 Property factors can play a key role in organising and instructing repairs to communal areas. The Property Factors (Scotland) Act 2011, due to come fully into force on 1 October 2012, will establish a registration scheme for factors, a dispute resolution service and a Code of Conduct. The Code of Conduct will increase transparency in relation to the services provided by property factors.

2.25 However, the 2011 Act did not increase the capacity of homeowners to switch (ie dismiss and replace) property factors where a majority of homeowners are unhappy with the service provided ^[32] .

2.26 There is existing provision in the Title Conditions (Scotland) Act 2003. In the absence of any provision in title deeds, a property manager may be dismissed by a majority of the units (section 28(1)(d) of the 2003 Act refers. However, this rule can be altered in the title deeds and a higher threshold imposed.

2.27 The Government is aware that modern title deeds for developments often include provisions on the dismissal and replacement of property factors.

2.28 Under section 64 of the 2003 Act, where a person is the manager of related properties, the owners of two thirds of those properties may dismiss and replace that person regardless of anything laid down in the title deeds and so long as any manager burden has expired ^[33] . A 'manager burden' is a burden which either appoints a particular party as a manager of related properties or vests in such a party the power to appoint another person to be such manager and dismiss that manager. A power conferred by a manager burden is can be exercised only if the person on whom the power is conferred is the owner of one of the related properties.

2.29 Switching property factors may always be difficult as owners need to work together: the decision is a communal one. Annex B of the Office of Fair Trading Report in 2009 on Property Managers in Scotland indicated that homeowners with an owners' or residents' association are more likely to consider that they receive value for money from their factor. ^[34]

2.30 There are a number of possible options for legislative or administrative change related to switching property factors:

• Option 1 is to take no action, particularly as the industry is undergoing major changes at the moment as the Property Factors (Scotland) Act 2011 is brought into force.
• Option 2 would be to issue guidance. Such guidance could, perhaps, outline best practice when placing provisions in title deeds on property factors and could offer advice to homeowners on dealing with factors and switching factors
• Option 3 would be to change the provisions on manager burdens, discussed above, so that they have effect for shorter periods
• Option 4 would be to amend the Title Conditions (Scotland) Act 2003 so that, for example, a simple majority (rather than two thirds) of residents can always dismiss a property factor, regardless of what the title deeds say, once the manager burden has expired.

Q19: What action, if any, do you think the Government should take to make it easier to dismiss and replace property factors?

Sustainability Standard for new buildings

2.31 On 1 May 2011 sustainability labelling was introduced to the Scottish Building Standards through the Building (Scotland) Act 2003. It applies to all new buildings. The labelling system has been designed to reward the achievement of:

• meeting 2010 building standards; and
• opting to meet higher levels that include energy and carbon emissions targets and also broader issues such as water efficiency and flexibility in design.

2.32 The labelling system rewards new buildings that meet the 2010 building standards with a Bronze level label. Further optional upper levels of sustainability are defined by Silver, Gold and Platinum labels. These have been created through identifying cost-effective benchmarks verifiable by the building warrant system. Section 7 of the Building (Scotland) Act addresses a variety of aspects of sustainability including :

• Resource use: dealing with energy for space and water heating, CO2 emissions and water use.
• Adaptability: building on the lifetime homes principles by defining a dedicated space for home working and mobility spaces for electric wheelchairs, prams or bicycle(s).
• Occupant well being: seeks to tackle issues such as enhanced noise insulation, increased natural light and improved security provisions.

2.33 The label can be utilised by developers or planners who may wish to demonstrate their environmental commitment by referring to the sustainability labels.

The role of standards in improving energy efficiency and reducing emissions

Why is this important?

2.34 Standards for new housing will help contribute to reducing emissions by ensuring that properties built today are to higher energy efficiency and emissions standards than existing housing. But, with over 85% of current housing in Scotland expected to be in occupation in 2050 ^[35] , we cannot rely only on new build to deliver savings. We need to consider what action needs to be taken to existing housing to help deliver our targets. We also need to consider how people use their buildings and how we can influence their behaviour to ensure that overall emissions are reduced.

2.35 Our aim is that maximising the incentives and opportunities on offer under a National Retrofit Programme, together with changes in attitudes and systems which provide a premium for sustainable housing, will drive the change in our housing that needs to take place. Minimum standards for existing housing could have a major role in helping to drive the market and in acting as a back-stop if incentives do not provide the scale of activity necessary to achieve our fuel poverty targets and meet the RPP milestones set out in Chapter 1.

Current minimum energy efficiency standards

2.36 There are already standards relating to energy efficiency for new build houses and existing social sector housing in Scotland.

New build

2.37 Any house built in Scotland (irrespective of tenure) must meet energy efficiency criteria set out in building regulations, within section 6 (energy) of the Building Standards Domestic Technical Handbook 2011. Overall building performance is set using a target emissions rate (measuring CO ₂ emissions) which must not be exceeded. The minimum performance of building fabric (insulation) and building services (heating, lighting, ventilation) are also specified. A designer/developer may meet the overall CO ₂ target in any way they choose provided these minimum levels of elemental performance are met. Details of meeting CO ₂ targets are set out in standard 6.1 with guidance on elemental performance set out in standards 6.2 to 6.6 (insulation, heating, lighting and cooling). Further provisions address the commissioning of building systems, the provision of information to the building owner and production of an Energy Performance Certificate.

Existing social housing

2.38 One of the 5 criteria within the SHQS is that housing must be energy efficient, which means that properties should have:

• 100 mm of roof insulation (minimum);
• Cavity wall (or equivalent) insulation (where technically feasible and appropriate);
• Hot water tank and pipe and cold water tank insulation;
• Full and efficient central heating ("efficient" means broadly equivalent to a G-rated boiler or better); and
• Any other energy efficiency measures that will bring the property up to a minimum energy rating subject to technical feasibility and proportionate cost.

2.39 The most recent Scottish House Condition Survey ( SHCS) ^[36] shows that 44% of social sector houses fail SHQS on the energy efficiency criteria. Most failures are for cavity wall insulation.

2.40 The Scottish Government believes the SHQS, including the energy efficiency criteria, can be met if landlords target their resources appropriately. The Scottish Housing Regulator is responsible for monitoring progress towards the SHQS as part of the Social Housing Charter, supported by Scottish Government guidance issued to landlords to encourage them to target resources.

Existing private housing

2.41 There are currently no standards for energy efficiency for owner occupied or privately rented houses. The only requirement for all housing is that it has satisfactory thermal insulation as part of the tolerable standard. This is defined in statutory guidance as having loft insulation (where a house can have it).

2.42 Tenants now have more information on energy efficiency of properties they rent through EPCs which were introduced on 4 January 2009, and with the introduction of the Energy Report within the Home Report from 1 December 2008 prospective buyers (as well as sellers) are more aware of the energy efficiency ratings of properties. This information is an important tool in driving behaviour change to recognise the benefits of energy efficiency, but, as noted elsewhere in this strategy, more needs to be done to effect this change. One of the drivers for more energy efficient homes with reduced carbon emissions will be the increasing costs of fuel.

Q20: What action can be taken to raise the importance placed by owners and tenants on the energy efficiency of their properties?

Consideration of future standards

2.43 The current standards are a step in the right direction, but more is needed if housing is to contribute fully to the challenging targets set out above. Exactly how much might need to be done by regulation will depend on the effectiveness of incentives as part of the National Retrofit Programme and behaviour change, but in recognition that these are unlikely to be enough, the Scottish Government has been looking at the potential role of additional standards.

New build

2.44 There is a commitment to review energy standards within building regulations for both 2013 and 2016. This follows recommendations within the Sullivan report on staged improvements to energy standards for new buildings in 2010 and 2013, with the intention of 'net zero carbon' new building by 2016/17, if practical.

2.45 Standards for new homes were last amended in October 2010. The 2010 Technical Handbooks set standards that reduce CO ₂ emissions from new homes by 30% compared to the previous 2007 standards.

2.46 The current review of standards for 2013 considers further reductions in emissions from new homes up to, and including, the 60 per cent reduction on 2007 emissions recommended in the Sullivan Report. Research is assessing the implications of a 45 per cent and 60 per cent reduction on 2007 levels. These equate to a further 21 per cent and 43 per cent reduction respectively on the present 2010 standards. Indications from the initial research are that the average increase in capital cost for a new house would be around £5,000 for the 21 per cent emissions reduction and £10,000 for the 43 per cent emissions reduction.

2.47 Consultation on revised standards is proposed for late summer 2012. We will need to balance the increase in cost with our aspiration for emissions reductions. The consultation will be accompanied by research into the costs and benefits of any proposed changes, together with a Business and Regulatory Impact Assessment presenting the context of the review and identifying not only costs and benefits but the context of the review and the wider implications of further changes to standards.

Existing social housing

2.48 The Scottish Government is separately consulting on a proposed Energy Efficiency Standard for Social Housing, building on the energy efficiency element of the Scottish Housing Quality Standard ( SHQS). The aim of the proposed standard is to improve the energy efficiency of, and minimise greenhouse gas emissions from, existing social rented housing. This is important to help landlords provide warmer, more energy efficient homes for their tenants, reduce fuel poverty and to contribute to the Climate Change targets of 2020 and 2050. The initial milestone for the new standard will be 2020, but the ultimate goal is to meet the 2050 target.

2.49 The Energy Efficiency Standard will be based on the energy efficiency and environmental impact scores generated when producing EPCs. Using the Scottish House Condition Survey, the most common building types in the social rented sector were identified. The impact of different energy efficiency measures was then modelled on each building type to establish the improvement in both the energy efficiency rating and the environmental impact rating from the EPC. Using that modelling work, and the views of the stakeholder working group established to steer the development of the new standard, minimum EPC ratings have been set for different building types. There are also different scores to be met depending on the fuel type used to heat the home. The tables below set out the proposed score to be met for each of the house types.

Table 2 - Standard for gas heated homes for 2020

Broad Property Type Heated by Gas	Minimum EPC (Environmental Impact) rating	Minimum EPC (Energy Efficiency) rating
Top floor flats heated by gas	C (70)	C (75)
Mid floor flat heated by gas	C (80)	C (80)
Ground floor flat heated by gas	D (65)	C (70)
Mid-terraced house heated by gas	C (70)	C (75)
End terrace / Semi-detached heated by gas	D (65)	C (70)
Four in a block - Lower heated by gas	D (60)	D (65)
Four in a block - Upper -heated by gas	D (60)	D (65)
Detached / bungalow heated by gas	D (55)	D (60)

Table 3 - Standard for electrically heated homes for 2020

Broad Property Type Heated by Electricity	Minimum EPC (Environmental Impact) rating	Minimum EPC (Energy Efficiency) rating
Top floor flats heated by electricity	D (60)	D (65)
Mid floor flat heated by electricity	C (70)	C (70)
Ground floor flat heated by electricity	E (50)	D (60)
Mid-terraced house heated by electricity	D (55)	D (60)
End terrace / Semi-detached heated by electricity	E (50)	D (60)
Four in a block - Lower heated by electricity	E(50)	D(60)
Four in a block - Upper -heated by electricity	D (55)	D (60)
Detached / bungalow heated by electricity	E (50)	D (55)

2.50 The modelling work used to determine the proposed energy efficiency standard could also be applied to the owner-occupied and private rented sectors, although there is a greater variety of house types in those sectors.

2.51 More information can be found in the consultation document on the Energy Efficiency Standard for Social Housing, including:

• the background to energy efficiency and social rented housing;
• the work done to date to improve energy efficiency in the social housing sector;
• why the Scottish Government thinks a new energy efficiency standard is necessary;
• the options considered for an energy efficiency standard for social housing;
• the financial implications of introducing a new standard;
• how progress towards any new standard would be measured and monitored; and
• the timetable for implementation.

If you wish to view or comment on the proposed Energy Efficiency Standard for Social Housing, please do so via the parallel consultation process via the Scottish Government website ^[37] .

Existing private housing

2.52 Chapter 1 of this strategy sets out our vision for a National Retrofit Programme to improve energy efficiency and reduce carbon emissions of existing housing by maximising the opportunities for incentives available to consumers. But a wide range of stakeholders, including the Existing Homes Alliance Scotland, WWF and the Fuel Poverty Forum, have argued that this on its own may not achieve necessary emissions savings from private sector housing to help meet our emission targets. The Scottish Government has therefore been looking at issues affecting possible future regulation, and proposes to set up a working group by the end of the year to consider if, how and when we might regulate. The rest of this chapter seeks further views on what might need to be considered ahead of identifying the design and timing of any regulation.

Q21: Should the Scottish Government introduce minimum energy efficiency standards for private sector housing?

Legislative Framework and policy levers for action

2.53 Scottish Ministers have powers under section 64 of the Climate Change (Scotland) Act 2009 to introduce regulation to require the assessment of energy efficiency and action to reduce the emission of greenhouse gases from existing houses. There are also powers under the Energy Act 2011 to set minimum standards in the private rented sector ( PRS) after 2015.

2.54 In March 2011, Scottish Ministers set out their position that we would not regulate before 2015 ^[38] , and would look to regulate owner occupiers and PRS at the same time.

Assessment of energy efficiency

2.55 Currently, houses which are rented or sold must have an energy efficiency assessment in the form of an EPC as a requirement of the EU Energy Performance of Buildings Directive ( EPBD). This is set out within building regulations (for new homes) and in the Energy Performance of Buildings (Scotland) Regulation. Additional provisions are identified in the Home Report regulations for houses being marketed for sale.

2.56 The Scottish Government consulted on proposals to amend the EPC processes to take account of the recast of the EPBD, with the consultation closing in January 2012. As part of this, a revised format for the EPC will be available from October 2012. The main changes relate to processes and ensuring that the recommendations report, which currently is only a requirement for Home Report purposes, must always be provided along with the EPC (which includes the rating for the property). This means that all EPCs generated after September 2012 will have the recommendations report which includes further information on cost effective measures.

2.57 The review focuses on processes which deliver information to building owners. In particular:

• review and implementation of revised practice in the operation of Approved Organisations; amendment to working practice of assessors to improve consistency;
• amendment in the procedure for delivery of newbuild EPCs; and
• introduction of quality assurance measures - sample checking of EPCs.

2.58 The UK Government's Green Deal programme will also use the EPC as the basis for Green Deal assessments. Assessments will be based on the Reduced Data Standard Assessment Procedure (RdSAP). This has been adapted for the Green Deal. Changes include the use of regional climate data in calculating the cost- benefit of improvement measures and the addition of further improvement measures to the list that RdSAP can recommend (and flagging which measures can be funded under Green Deal). Enhancements that will improve assessment, including under Green Deal, include:

• greater flexibility in the assessor input of dwelling data, including a more detailed definition of building elements where needed (for example, differing areas of construction on the same wall);
• the facility to use fabric U-values other than the RdSAP defaults (based upon age and construction type); and
• recognition of a range of newer building services technologies and types of microgeneration.

2.59 In our March 2011 statement we said that we would consider carrying out further research to see whether the EPC would be an appropriate route to assess energy efficiency for regulation purposes. Feedback from consultation on the Energy Efficiency Action Plan and from discussions with stakeholders suggests that research should look into issues such as the data used to generate the EPC, its predictive accuracy, applicability to all housing types and impact on promoting improvements.

2.60 We also propose that any research should consider how the information presented in an EPC could be amended to help provide useful information and drive behaviour change.

Q22: How could we amend EPCs to make them a more useful tool for influencing behaviour change to improve energy efficiency?

Role of incentives, design and timing of minimum standards

2.61 As set out above, the Scottish Government proposes to draw together a range of stakeholders to form a working group that will consider whether it might be appropriate to introduce minimum energy efficiency standards for private sector housing. In looking at options for possible regulation, our guiding principles will be that:

a) Any regulation should fit with incentives, such as under the National Retrofit Programme, to encourage voluntary action and maximise opportunities to make use of incentives.

b) The design of standards should be clear, understandable and appropriate to Scottish housing types, and regulation should be financially sustainable and equitable.

c) The timing of introducing any regulations should be appropriate - there should be sufficient lead in time to the introduction of regulation to enable owners to prepare for it. Consideration also needs to be given to the rollout of Green Deal and what impact this will have on energy efficiency, and timing should take account of housing market conditions.

These issues are explored in more detail below.

Q23: Are there other key principles that we ought to consider when looking at the possible introduction of regulations?

(a) Role of incentives

2.62 Chapter 1 sets out our plans for a National Retrofit Programme which includes the provision of incentives to support householders in improving the energy efficiency of their properties.

2.63 The take up of incentives and voluntary action will determine the need for regulation in achieving our emission reduction targets. But the knowledge of forthcoming regulation can itself drive take up of incentives, and so reduce the amount of enforcement needed once standards are in force. It will be important that the take up of incentives and the impact of voluntary action is assessed, and that there is clarity as to when and what standards will apply.

2.64 Regulation could require owners to carry out only the work for which incentives are, or have been, available. For example, the current intention in England and Wales is that PRS properties will not be able to be rented out after 2018 if the property has an EPC rating of F or G rating, unless all the Green Deal finance available on the property has been taken out.

2.65 Alternatively, regulations could set a higher level which is more easily achievable once incentives have been available for part of that work.

2.66 We also need to make sure that regulation does not inadvertently affect eligibility for incentives in Scotland that are available across Great Britain. Given that the Energy Company Obligation ( ECO) will be replacing CERT, the Scottish Government is working with the UK Government to understand how regulations might affect eligibility to ECO, to ensure that homeowners in Scotland are no worse off than elsewhere in GB.

2.67 The Scottish Government is also looking at whether there are other types of incentives to encourage voluntary improvement, or to support minimum standards. The Climate Change (Scotland) Act 2009 already provides for councils to run schemes to offer council tax discounts for improving the energy efficiency of houses. The new devolved Scottish land and property transaction tax to replace Stamp Duty Land Tax could provide a potential longer term option for promoting energy efficiency.

Q24: How could regulation be used to support the uptake of incentives?

(b) Design of standards

Options for regulation - how

2.68 In March 2011 we also published an analysis report Impacts of Options for Regulating Energy Efficiency Standards in the Domestic Sector ^[39] of four broad approaches for regulation. These were:

(1) a measures based approach, where a set of specific energy efficiency measures is required - for example, homes are required to have cavity walls and lofts insulated to a minimum depth, where this is technically feasible.

(2) a measures based approach through applying a simplified version of the Scottish Housing Quality Standard ( SHQS) criteria for energy efficiency elements.

(3) Standards based on a recommendation for the property to reach a certain energy efficiency standard, for example by setting an EPC score that must be achieved. A home could have different combinations of energy efficiency measures to reach a given EPC rating, or a specified u value.

(4) requiring that recommendations from the Energy Report (up to a cost limit) are carried out when a house is sold or rented.

Q25: In section 2.68 we identify design options for the standard. Do you have any views on the options set out in that report? Are there other options that we should be considering?

2.69 There is clearly overlap between some of these options modelled for the private sector and the work which is being consulted on as part of the proposed Energy Efficiency Standard for Social Housing ( EESSH) . It may be appropriate for private sector regulation to follow a similar approach by considering whether standards should vary by house type, noting that there are likely to be more house types in the privately owned sector than the social sector. We will take account of feedback to the EESSH consultation in taking forward consideration of private sector regulation.

2.70 As highlighted in the material on improving house condition earlier in this chapter, there can also be difficulties in achieving set standards in mixed tenure blocks if private and social housing are obliged to meet different requirements. In order to enable social housing to meet any standards set for that sector, and to ensure that private sector housing contributes fully to meeting our emission targets, we may wish to consider whether, in some circumstances, it would be appropriate to set a minimum standard for a type of housing block which all owners are required to meet, rather than setting standards for different types of ownerships.

Q26: Do you agree that any regulations for private sector housing ought to reflect the energy efficiency capacity of the property and/or location, as is proposed for the social sector?

Q27: If you agree with Q26, should houses of the same type in the social and private sectors be expected to meet the same standard?

Q28: Are there other specific issues we need to consider in introducing regulation on the energy efficiency of the home for particular groups of people, for example older people, those with disabilities, people from minority ethnic communities?

Options for regulation - trigger points

2.71 Our current thinking is that regulation, if introduced, should apply at the point of sale or rental, but we want to think about how this might affect the property market and, as a result, what impact this might have on the delivery of emissions reductions. If we only regulate at the point of sale or rental, we will only tackle a proportion of homes that are not energy efficient, and the rate at which these are improved will be affected by the rate of movement in the housing market over the period of this strategy.

2.72 If we were to apply any standards only at the point of sale or rental and that did not achieve the necessary progress in improving energy efficiency to meet our 2020 and 2050 targets, we may wish to consider also applying other, additional trigger points. For example, where a property is having major structural repairs, or the local authority is otherwise taking action which is not specifically triggered by energy efficiency, we could regulate to require that energy efficiency standards are also met at that time.

2.73 Building regulations currently have a mechanism that applies when any house is extended. It considers the level of fabric insulation to the existing construction. If the standard is poor then the extension has to be built to very high insulation standards. However if the standard of roof and wall insulation is reasonable, the extension can be built to slightly less demanding insulation standards. This gives building owners encouragement to improve the existing stock. A review of these measures is currently underway.

Q29: Should we consider additional trigger points to point of sale or rental? If so, what?

Options for regulation - rollout

2.74 As set out above, we believe that any regulation ought to apply to both owner occupiers and the PRS from the same time. But we are also considering whether the introduction of regulation could be phased in.

2.75 There are different ways that this could be done, including -

• By energy efficiency ratings - targeting properties with the lowest EPC ratings first.
• By location - minimum standards could be introduced in areas which have already had access to area based incentive schemes.
• Varying standards over time - for example, looking at the proposal from the Existing Homes Alliance Scotland, that properties be required to meet a lower EPC rating by a certain date, to be raised to a higher level by a later date; or, at point of sale or rental only, but if looks like this is insufficient to meet our contribution to emission targets, considering a date by which all housing has to meet that standard, irrespective of whether properties have been sold or rented.

Q30: Should rollout of any regulation across the owner occupied and PRS sectors be phased or all at once? If you think that rollout should be phased how do you think this should be done?

Options for regulation - enforcement and sanctions

2.76 Who enforces regulation, and what happens if someone doesn't comply, will be influenced by the way we regulate and the form of regulation introduced.

2.77 For example, if we look at using the point of sale or rental, then regulations may be enforced by the local authority or as part of the conveyancing process at the point of sale by the use of an EPC and/or incorporated into the Home Report.

2.78 The seller could potentially pass the obligation to improve a property to the new owner with a condition to do this within a fixed time, which would need to be checked up on. If the conditions aren't met, enforcement actions (for example by local authorities) could be by way of a fine for non compliance, or an owner not being able to sell or rent their house until it complies with regulations. Local authorities could also be the enforcement authority for the PRS.

2.79 The enforcement mechanism and how sanctions might be designed will vary depending on what approach is taken, but equally it will be important to assess how practical enforcement is when considering the options. We think that the main points to be considered will be around cost; capacity; processes; and suitability of existing structures.

Q31: What other issues around enforcement do we need to think about when considering how different approaches to regulation might work?

Q32: In sections 2.76 - 2.79 we suggest that one way of regulating would be to issue sanctions.

A. Do you think that sanctions on owners should be used to enforce regulations? Yes/No

B. Should owners be able to pass the sanction or obligation on to buyers?

(c) Timing

2.80 The Scottish Government stated in its report of March 2011 that we would not regulate before 2015. We want to ensure that all the issues affecting regulation are fully considered, which includes assessing the rollout of new incentives, such as the National Retrofit Programme working together with Green Deal and ECO. However, we also believe that clarity on when new standards might apply can also drive the take up of incentives, and that it is important to ensure that owners have sufficient time to prepare for them, particularly if there are sanctions for non-compliance.

2.81 We will consider with the working group when any regulations might apply from. This will take account of key dates such as the introduction of Green Deal and ECO from late 2012; the timeframe for research into EPCs set out in sections 2.59 and 2.60 above; regulation of the PRS in England and Wales from 2018; proposed implementation of the Energy Efficiency Standard for Social Housing by 2020; and our climate change targets for 2020 and 2050.

Q33: The Scottish Government does not intend to regulate before 2015. The working group will consider what options for timing of any regulation might be appropriate, but, given all the points set out in sections 2.80-2.81 from when do you think it might be appropriate to apply regulations?