Scotland's Sustainable Housing Strategy: Analysis of Responses to 'Homes that Don't Cost the Earth' Consultation

5 Analysis of responses: New Build Market Transformation

5.1 Questions 38 to 42 covered the following issues for the new build market:

• measures to encourage sustainable neighbourhoods;
• challenges to new build transformation;.
• support for innovative construction techniques; improvements to the Affordable Housing Supply Programme to champion greener techniques; and other measures to promote sustainable housing.

Q38 What steps can we take to ensure that we designand develop sustainable neighbourhoods?

5.2 Two thirds of respondents answered question 38 (68%), with particularly high rates of response from the local authority and professional groups. Key issues were an expert multi-disciplinary approach, the role of building standards and planning regulation. Other issues included housing quality and exemplars.

5.3 A few welcomed progress to date, including Scottish Government work to encourage consideration of the main sustainability issues at the design stage and put in place high performance standards through building regulations.

5.4 Over a quarter of respondents advised a multi-disciplinary approach including project managers acting as sustainability champions and the use of sustainability checklists. Projects should plan for public transport connections, renewable energy generation and community heating schemes, resource efficiency in new homes, access to amenities, accessibility and flexibility for a range of households, open space and green networks. Suggestions also included long term management and maintenance, and wider changes in the way we work and travel. Several of the non-standard responses to the WWF campaign called for such features:

"SG should insist all new-build houses should incorporate proven non-carbon power and/or water generation: solar panels, micro-hydro generators, community based wind/wave or tidal generators, and offer incentives to existing buildings to be retrofitted to a high standard." – Individual campaign response

5.5 Over a quarter of respondents commented on the role of building standards and planning regulation. With respect to planning, many comments stressed the need to use the planning system to create a neighbourhood with minimal private transport requirements, and to promote district heating systems and local energy production. Other specific points included a case for nationally applied design and other standards, while others saw a role for Strategic and Local Development Plans and other subsidiary policies in articulating the policy context for standards of design. Homes for Scotland was concerned that the use of design guides across the country was pushing home builders to deliver a higher density housing environment that, in their view, customers do not want.

5.6 With regard to building standards, the points most frequently made related to the cost implications of rising energy standards. It was also suggested that the Scottish Government was under pressure to reduce both the 2013 interim standards and the 2016 zero-carbon standards, and some respondents saw that as a threat to the achievement of climate change targets.

5.7 Some respondents advised against increasing costs in the current housing market:

"... the overall number of completed new homes in Scotland has slumped from 25,741 in 2007 to 15,150 in 2011. Over that period, private sector housing has plummeted by 54% from 21,679 units in 2007 to just 9,893 units last year. In this context, the Scottish Government needs to be extremely careful that any additional measures introduced to encourage increased sustainability in new build housing do not impose costs that are likely to choke off recovery in the number of new homes completed." – Scottish Building Federation

5.8 There was a private sector call for de-regulation that would reduce build costs, to offset the additional cost of greener homes and more sustainable communities. It cited the requirement for a downstairs future shower space as an example of a standard that in their opinion offered little benefit and added cost

Q39 Section 4.10 sets out the main challenges to address in taking forward our aim of new build transformation. What further challenges, if any, need to be addressed?

5.9 The consultation set out challenges to new build transformation: achieving higher levels of emissions reduction may require significant changes in construction methods and technologies; need appropriate capacity for innovative components and housing systems to be tested; the depressed housing market and constrained availability of finance limits demand for innovative products and investment in research and new facilities; some consumers may be unwilling to be 'early adopters' of new designs and technologies which affects demand; need to develop a multi-skilled workforce rather than specialists to avoid short term site employment.

5.10 Over half the respondents answered question 39 (59%), with low rates of response from the professional and 'other' groups. Apart from some comments on the challenges set out in the consultation, the further challenges identified were: economics and financing; use of building standards and planning systems; demonstration of benefits; and the nature of the development industry.

5.11 Nearly half the respondents commented on the economics and financing of housing, with concerns that the true costs of more sustainable building might be higher than stated and calls for whole life cost analysis of schemes such as the Fife Housing Innovative Showcase properties. One respondent queried the scale of cost premiums identified in paragraphs 2.44 - 2.47 of the consultation, compared to the South Lanarkshire College project. One of the non-standard campaign responses suggested that solar panels should be made more affordable by installing them at zero or very low cost with the costs recoverable from the energy sold back to the grid.

5.12 Although private development had dropped to a very low level, demand for housing remained high. One local authority suggested that developers were likely to improve sustainability where it was cost effective and where they could see a positive impact on sales, another noted that it proved difficult to sell new ground breaking eco-friendly homes at the Highland Housing Expo.

5.13 Homes for Scotland pointed out that very few house-builders had pursued the greener homes agenda, which in their view suggested that it did not make economic sense at this time. One respondent pointed out that high levels of prefabrication often delivered speed benefits, which were not always desired in a slow moving market. Another suggested that initially the number of house builders able to offer modern methods of construction (MMC) would be limited and the need to drive down costs through economies of scale would lead to a small number of large suppliers, until such time as MMC became viable at a smaller local scale.

5.14 Some raised issues of grant for affordable housing, which are discussed in the responses to question 41. Again, there were references to valuation issues. A private sector organisation argued that the Scottish Government had been very poor in assisting house-builders with innovation funding, and in particular that the Technology Strategy Board^[15] was not available in Scotland.

5.15 Some respondents commented on the importance of building standards. Only raising standards would improve sustainability; change and innovation came primarily through the 2010 building regulations, rather than through responses to consumer demand or producer innovation in the boom years up to 2008. Watering down or delaying the 2013 and 2016 standards could put the 10,000 jobs estimated to be created by the climate targets in jeopardy. One of the individual campaign respondents noted that building regulations were not strict enough to make new local homes carbon-neutral, but the cost of PV panels to developers would be small compared to individuals adding them at a later date. The WWF campaign itself called on the government to establish net-zero carbon standards for new homes by 2016.

5.16 Several raised the issue of delays in the application of higher standards- homes were being constructed under a range of different building regulations dependent on the date the building warrant was granted. The NHBC recommended adoption of a similar process to their own Building Standards which change annually, with a few months lead in time, applying from January at the start of laying foundations.

5.17 Again, there were calls for greater sharing of information. In addition to earlier suggestions, respondents advocated medium term monitoring of initiatives such as the Housing Innovation Showcase and for experience from pilot systems to be shared with developers.

5.18 Some respondents called for improved quality of workmanship. There was growing recognition of a performance gap between design and as-built performance - one respondent suggested application of a design penalty if an installer does not follow a quality assurance scheme, so that a building would be over-designed to mitigate the risk of underperformance. Conservatism in the industry was criticised - lack of training was also a problem during boom times, with manufacturers and producers generally unwilling to be early adopters of change.

"We note that there appears to be a growing consensus that the quality of workmanship plays a key role in determining whether or not a new build property will deliver the energy savings promised. All workers on site have to be brought into the low carbon message, and there is a key role for on-site project managers (a clerk of works) to oversee overall quality by checking the work of all the different sub-contractors." – 'Other' group

Q40 What action is needed to increase the capacity fordeveloping and bringing to market innovative methods of construction?

5.19 Nearly two thirds of respondents answered question 40 (64%), with particularly high rates of response from the local authority and professional groups and a low rate of response from the 'other' group. The key issues were raising confidence and awareness, funding and incentives, and regulatory standards. Some respondents repeated their response to question 39.

5.20 Over a third called for evidence to give confidence in and raise awareness of such methods, including life cycle analysis and proof of product, demonstration projects, information, and recognition of the current use of 'innovative' methods of construction in other parts of the UK and Europe; some of the calls for case studies may be superseded by the Greener Homes Prospectus,^[16] issued concurrently with the consultation. There were calls for robust evidence of benefits of new technologies or construction methods in use, with sharing of best practice, and long-term monitoring to assess performance and to consider the views of the building occupants, the implications of long term maintenance, and life cycle costs. Some called for pilot schemes, but others pointed out that the proposals set out in the Sullivan report did not require innovative or ground-breaking methods since the techniques have been used in Sweden and Germany for years – a knowledge exchange was needed, for instance with volume house builders learning from Passivhaus completions in Scotland.

5.21 As well as raising awareness in the industry, there were again calls for a sustained consumer-focussed campaign to raise the profile of energy efficiency so that house buyers would demand new homes with higher efficiency standards.

5.22 Over a third of the respondents called for funding and incentives: funding for affordable housing to lead market transformation, tax breaks for developers to increase capacity in the construction industry, and financial incentives to local authorities to use innovative / modern methods of construction. There were numerous calls for funding of research and product accreditation, including calls from the private sector for 50% research funding to industry-led consortia for commercially focused, near to market solutions; and for the National Construction Innovation Centre proposed by Scottish Universities and currently 'on hold' with Scottish Funding Council.

5.23 A quarter called for regulatory standards, including continuing to set demanding building standards and allowing planning requirements that promote high performance housing, including two calls, from a local authority and a private sector organisation, to confirm zero carbon standards for 2016 as recommended in the Sullivan report. An additional requirement could be set for developers to reduce onsite waste – this would encourage prefabrication, which retains waste at the factory. Planning might require new estates to be designed around district heating systems, or all houses to be orientated to the South unless justifiable not to do so and designed to Passivhaus standards. It could be made easier to get planning permission for buildings with proven alternative construction methods.

5.24 Other issues were: education, training and accreditation to upskill the industry, demand related to the state of the market, financial market transformation with mortgage lenders both accepting and encouraging MMC, and varied opinions on centralised procurement including difficulties in delivering community benefits.

Q41 What further changes to the operation of the Government's affordable housing supply programme would help to enable it to champion greener construction methods and technologies in the medium term?

5.25 Over half the respondents answered question 41 (59%), with particularly high rates of response from the RSL, local authority, and professional groups and a very low rate of response from the 'other' group.

5.26 Most respondents called for increased funding for the AHSP in general, a higher rate of supplementary funding for higher standards of sustainability, and for re-structuring AHSP to allow longer term programming.

5.27 There were calls for government to recognise the tensions inherent in its ambition for improving energy efficiency while reducing Housing Association Grant (HAG), and to therefore increase the current £4,000 subsidy to cover the additional costs, particularly in remote and island communities. There were several calls for a return to significantly higher levels of public subsidy, with reference to the increased construction costs acknowledged in the Greener Homes Prospectus, and for funding to incentivise higher standards and new technologies separate from the mainstream AHSP budget. A local authority noted the difficulty of addressing issues of enhanced standards at extra costs which is in conflict with providing the quantity of new build homes required to meet the needs of those on waiting lists and homeless households.

5.28 Certainty in programming over longer periods would assist effective, medium term procurement involving off-site manufacturing. There were calls for certainty of investment levels over at least 3 years, or over 3-5 years to generate the efficiencies and relationships which could deliver greener construction methods and technologies. One RSL suggested flexibility in subsidy arrangements for projects which were purchased but not developed under the previous funding regime - discounting previous grant would help to generate subsidy levels capable of developing exemplar projects; another suggested a whole life funding calculation to include revenue from FiT and RHI being returned to the Government rather than held by the affordable housing developer.

5.29 A few respondents discussed procurement options, with mixed views on volume procurement and calls for financial support to private sector partners in affordable housing supply. An RSL commented that the Greener Homes Prospectus does not address procurement and its examples of new developments averaged fewer than 50 units. The SFHA commented that there was a risk that social housing was seen as a testing ground while a failure to mainstream would mean that savings were never fully realised. Some cautioned that any process should allow potential for local companies to bid, without undue over-centralisation, and that there was already a strong partnership approach across local authority services and RSLs.

5.30 Other recommendations included financing options to achieve higher standards, changes to the 'Section 7' criteria,^[17] and adoption of standardised sustainable specifications.

Q42 What further action is needed to influence the construction industry to make greater use of innovative methods to deliver more greener new homes?

5.31 Over half the respondents answered question 42 (60%), with a high response rate from the professional group and a low rate from the 'other' group.

5.32 A third identified the importance of regulation, including consideration of European targets, use of EPCs, building standards and planning systems to require greener new homes, including fast-tracking of applications. Many of the responses echoed themes discussed in response to questions 38 and 39. There was again only limited reference to zero carbon targets, but the Energy Saving Trust referred to forthcoming European requirements.^[18] Other, more general comments were that the market was unlikely to provide widespread delivery of more sustainable homes of its own accord, so regulation and higher standards were likely to be necessary. Other suggestions were to fast track planning and building warrant applications for developments using significant sustainable construction and energy technologies; and to stimulate competition in the house building industry by enforcing energy efficiency ratings for new homes and highlighting associated running costs.

5.33 Over a third referred to housing market issues, including the need for scale and predictability. Scale would allow builders/developers to produce at the right level but predictability was needed to justify investment in new technologies. There needed to be confidence that the market would not be subject to fluctuations that could remove demand for a product which had taken heavy investment. One of the professional group commented that the construction industry rarely changed common practice except in response to regulation or market expectations - innovation would need to be encouraged by financial assistance and the prospect of greater market share for those prepared to take a risk. Current economic conditions were not conducive to change and expectations of what could be achieved would need to be managed over a longer period than may have originally been envisaged.

5.34 There was a call for a centre of excellence akin to the Zero Carbon Hub in England, where Scottish Government could work with industry and stakeholders to develop exemplar low/zero carbon new homes suitable for the Scottish context and climate, training and upskilling for construction workers, and a programme of measuring, testing, monitoring and quality assurance to ensure that new homes would perform as designed.

5.35 Some called for proof of suitability for mortgage lending. The Council for Mortgage Lenders relayed members' concerns about the ability of some designs that use innovative methods of construction to achieve a life span of at least 60 years and called for recognised standards of design, manufacture, and erection, plus the backing of a warranty provider such as NHBC.^[19] It pointed to the stalling of development of a loss prevention standard, LPS 2020.^[20] A private sector respondent highlighted the new Build Offsite Property Assurance Scheme (BOPAS, see Annex C).