the future of the code for sustainable homes - making a rating mandatory

8/14/2019 The future of the Code for Sustainable Homes - Making a rating mandatory

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The uture o the Code or Sustainable HomesMaking a rating mandatory

www.communities.gov.ukcommunity, opportunity, prosperity


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Consultation

July 2007Department or Communities and Local Government

The uture o the Code or Sustainable Homes

Making a rating mandatory


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Department or Communities and Local GovernmentEland HouseBressenden PlaceLondonSW1E 5DUTelephone: 020 7944 4400

Website: www.communities.gov.uk

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July 2007

Product Code: 07 HC 04748/b


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Contents

Summary 4

Part 1: Introduction 5

Part 2: A mandatory rating against the Code 9

Part 3: The uture o the Code or Sustainable Homes 18

Annex A: Consultation questions 20

Annex B: The consultation criteria 21

Annex C: Partial Regulatory Impact Assessments 22

Mandatory rating against the Code 22

Li etime Homes 43

Annex D: Example certi cates 60


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SummaryThe Code or Sustainable Homes (the Code) provides a comprehensive picture o thesustainability o a new home. It can be used by progressive home builders to di erentiatethe per ormance o their homes rom the per ormance o others and gives consumers the

in ormation they need to be able to make sustainable choices.From January 2008, Energy Per ormance Certifcates (EPCs) or new homes will ensure thatevery purchaser has in ormation about the energy e ciency o their home and practicalsuggestions or making it even more e fcient. The Code builds on this in two important ways.

It provides a ramework within which home builders can be recognised or going beyond current Building Regulations on energy e fency.

Because all new homes already reach a high level o per ormance on the EPC scale,even big improvements on top o current Building Regulations dont register signi cantly.

The energy element o the Code is based on percentage improvements over BuildingRegulations so big improvements will be clearly visible.

It sets standards or a wide range o other aspects o sustainability whichare not mandatory in the Building Regulations but are critical to limiting theenvironmental impact o housing.

As well as Energy, the Code covers other key aspects o sustainability including water,pollution, waste, materials, and ecology. For all elements, it provides guidance on how homebuilders might achieve high standards in these areas and gain the credit or doing so.

The Code was introduced as a voluntary standard in England in April 2007. It works by awarding new homes a 1 to 6 star rating based on their per ormance against the ninesustainability criteria and there ore their overall environmental impact.

At the same time as we announced the introduction o the Code as a voluntary standard, we consulted on the principle o making it mandatory or all new homes to be ratedagainst the Code. This would not mean that every home would have to be assessed againstthe Code or that they would have to reach certain star ratings by certain dates. It wouldsimply ensure that every new home owner would know whether their home had beenbuilt to higher environmental standards than the Building Regulations and i so what

standards it met. We proposed doing this to provide a urther boost to the uptake o the Code having toshow how their homes per orm against the Code will encourage home builders to considerbuilding to its higher standards and making this in ormation routinely available willencourage consumers to become more demanding.

Consultees strongly supported this, with 61 per cent in avour and only 8 per centopposed. This consultation is the next step in determining whether to proceed with thisproposal and asks speci c questions about how a mandatory rating would work.

In addition, this consultation invites views on whether we should make the Li etime Homesstandard a mandatory element o the Code at progressively lower star ratings over time.Li etime Homes aims to make living in a home as easy as possible, or as long as possible,through thought ul design.


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Part 1. Introduction

Background to the Code or Sustainable HomesThe Code or Sustainable Homes (the Code) was introduced in England 1 in April 2007

ollowing extensive consultation with environmental groups and the home building and wider construction industries.

The aim o the Code is to improve the overall sustainability o new homes by setting asingle national standard within which the home building industry can design and constructhomes to higher environmental standards, and giving new homebuyers better in ormationabout the environmental impact o their new home and its potential running costs.

From January 2008, Energy Per ormance Certi cates or new homes will ensure that every purchaser has in ormation about the energy e fciency o their home and practical suggestions

or making it even more e cient. The Code builds on this in two important ways:

It provides a ramework within which home builders can be recognised orgoing beyond current building regulations on energy e ciency because allnew homes already reach a high level o per ormance on the EPC scale, even bigimprovements on top o current Building Regulations dont register signi cantly. Theenergy element o the Code is based on percentage improvements over BuildingRegulations so big improvements will be clearly visible.

It sets standards or a wide range o other aspects o sustainability which are notmandatory in the Building Regulations but are critical to limiting the environmental

impact o housing. As well as energy, the Code covers other key aspects o sustainability including water, pollution, waste, materials, and ecology. For allelements, it provides guidance on how home builders might achieve high standardsin these areas and gain the credit or doing so.

Designing and building to the Code has already begun. Large parts o the social sectorhave already committed to building to certain Code levels, as set out in Box 1 overlea . Butthe Government is committed to encouraging its uptake across all home building, includinghome building in the private sector.

To encourage uptake as much as possible, we asked, in the consultation document Building a Greener Future: Towards Zero Carbon Development 2, whether providing arating against the Code should be made mandatory or all new homes rom April 2008.This would not mean that every home had to be assessed against the Code. It wouldsimply mean that every home would get a rating, indicating whether it had been assessed,and, i it had, the level o per ormance that it had achieved.

Raising the pro le o the Code or new homes in this way, and raising awareness amongsthomebuyers, could boost the demand or more environmentally riendly homes and boostthe market or environmentally riendly technologies and construction methods. By makingratings, and not assessment, mandatory we believe that the aim could be achieved in theleast regulatory and most cost-e ective manner.

1 The Code does not apply in Scotland, Wales or Northern Ireland2 www.communities.gov.uk/index.asp?id=1505157


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Consultees, which included industry, non-Governmental organisations, and localauthorities, agreed with our proposals and responses were highly in avour o a mandatory rating or new homes against the Code. However there was some con usion over what this

would mean in practice. The key issues raised in the consultation are discussed in Part 2.b.

Box 1:As well as those private developments that are being built to the Code standards, all newGovernment unding ( or example through the Housing Corporation) or homes built byregistered social landlords, as well as those developed by English Partnerships or with direct

unding rom the Governments housing growth programmes will in uture comply with Level 3o the Code.

Furthermore, rom April 2008 at the latest, all new service housing contracted by the Ministryo De ence will meet Level 3. The Department o Health will actively encourage National HealthService organisations to adopt Code Level 3 when they commission new dwellings, and theCarbon Challenge will incentivise the development o homes at Level 5 and 6.

What we are consulting on nowResponses to Building a Greener Future strongly supported the introduction o amandatory rating against the Code, or new homes. Parts 2 and 3 o this consultationexplore in more detail what this will mean and ask speci c questions relating to:

1) Making rating against the Code mandatory or new homes.

2) The connection between the Code and Energy Per ormance Certi cates.

3) Using Home In ormation Packs (HIPs) as the mechanism or making the Code ratingavailable to prospective buyers.

4) When we should update the Code.

5) The uture content o the Code, including introducing minimum standards or Li etimeHomes.

A ull list o questions being asked is at Annex A.

Regulatory Impact Assessment A partial Regulatory Impact Assessment (RIA) was produced when the Code was launchedin December 2006, based on research undertaken by Cyril Sweett or the HousingCorporation and English Partnerships 3. An updated partial Regulatory Impact Assessmentis attached at Annex C o this consultation paper, which takes account o updated costin ormation commissioned rom Cyril Sweett and Faber Maunsell. Also attached is a partialRegulatory Impact Assessment on making the Li etime Homes standards a mandatory element o the Code at progressively lower star ratings over time. Full Impact Assessments

will be provided in due course.

3 www.cyrilsweett.com/news/researchandlit.htm


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How to respondQuestions on which we are seeking input are raised throughout this document andrepeated in Annex A. Responses to this consultation must be received by Tuesday 23 October 2007 .

These can be submitted by email, letter or ax to: Jeannette HendersonSustainable Buildings DivisionDepartment or Communities and Local GovernmentZone 2/H6, Eland HouseBressenden PlaceLondon, SW1E 5DUFax: 020 7944 5752email: [email protected]

When responding please state whether you are responding as an individual or representingthe views o an organisation. I responding on behal o an organisation, please makeit clear who the organisation represents and, where applicable, how the views o themembers were assembled.

Additional Copies You may make copies o this document without seeking permission. Further printed copiescan be obtained rom:

Communities and Local Government PublicationsPO Box 236

Wetherby West YorkshireLS23 7NB

Tel: 08701 226 236Fax: 08701 226 237

E-mail: [email protected]

An electronic version can be ound at the Consultation Section o the Communities andLocal Government website: www.communities.gov.uk

Con dentiality and Data Protection Your responses may be made public by Communities and Local Government. I you donot want all or part o your response or name made public, please state this clearly inthe response. Any con dentiality disclaimer that may be generated by your organisationsIT system or included as a general statement in your ax cover sheet will be taken toapply only to in ormation in your response or which con dentiality has been speci cally requested.

Introduction


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In ormation provided in response to this consultation, including personal in ormation,may be subject to publication or disclosure in accordance with the access to in ormationregimes (these are primarily the Freedom o In ormation Act 2000 (FOIA), the DataProtection Act 1998 (DPA) and the Environmental In ormation Regulations 2004). I you

want other in ormation that you provide to be treated as con dential, please be aware that,under the FOIA, there is a statutory Code o Practice with which public authorities mustcomply and which deals, amongst other things, with obligations o con dence.

In view o this it would be help ul i you could explain to us why you regard thein ormation you have provided as con dential. I we receive a request or disclosure o thein ormation we will take ull account o your explanation, but we cannot give an assurancethat con dentiality can be maintained in all circumstances.

An automatic con dentiality disclaimer generated by your IT system will not, o itsel , beregarded as binding on Communities and Local Government.

Communities and Local Government will process your personal data in accordance withthe DPA and in the majority o circumstances this will mean that your personal data willnot be disclosed to third parties.

Help with queriesQuestions about the policy issues raised in the document can be addressed to:

Jeannette HendersonZone 2/H6 Eland HouseBressenden PlaceLondon SW1E 5DUor by e-mail to [email protected].

I you have comments or complaints about the way this consultation has been conducted,these should be sent to:

Albert JoyceDepartment or Communities and Local Government Consultation Co-ordinatorZone 6/H10Eland House

Bressenden PlaceLondon SW1E 5DUor by e-mail to: [email protected]

A copy o the consultation criteria rom the Code o Practice on Consultation is in Annex B.


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Part 2: A mandatory rating against the Code

What is the Code?The Code measures the sustainability o a new home against categories o sustainable

design, rating the whole home as a complete package.

The Code uses a rating system indicated by stars, to communicate the overallsustainability per ormance o a new home. A new home can achieve a sustainability rating

rom one to six stars depending on the extent to which it has achieved Code standards.One star is the entry level above the level o the Building Regulations; and six stars is thehighest level refecting exemplar development in sustainability terms. A Code assessmentmust be carried out by a licensed and registered Code assessor.

A new home is de ned as any new dwelling in regulation 2.1 o the Building Act 2000. TheCode is only suitable or new homes as discussed in Part 2.b o this consultation. It is notdesigned to apply to existing homes, to re urbishments, or to conversions (see Part 2.b).Similarly it cannot be used or certain types o housing or older people and supportedhousing where design eatures include integrated communal acilities.

There are nine categories included within the Code:

Categories Flexibility

Energy e ciencyWater e ciency

Minimum standards at each Level o the Code

MaterialsSur ace water run-oWaste

Minimum standards at Code entry level

PollutionHealth and well-beingManagementEcology

No minimum standards

Minimum standards exist or ve o the categories these must be achieved to gain a onestar sustainability rating. In addition energy e ciency and water e ciency categories haveprogressive minimum standards that must be achieved at each successive level o the Code,recognising their importance to the sustainability o any home. For materials, sur ace waterrun-o and waste only the minimum standard or the one star rating is compulsory.

Apart rom these ve minimum requirements the Code is completely fexible; developerscan choose which and how to obtain points under the Code in order to achieve a highersustainability rating. The technical guidance document 4, aimed at developers and assessors,sets this out in more detail.

A Code assessment is a two-stage process. Code assessors will conduct initial design stageassessments leading to an interim Code certi cate. Be ore a nal Code certi cate can beissued a post-completion check must be carried out in order to ensure that what wasdesigned was actually built.

4 www.planningportal.gov.uk/uploads/code_ or_sustainable_homes_techguide.pd


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The Code was developed with the Building Research Establishment (BRE) and is basedon Ecohomes, which it has replaced or new homes in England. To support the Code wehave worked with BRE to put in place an assessment and certi cation system. BRE havere-trained Ecohomes assessors to undertake Code assessments and are training new Codeassessors to meet the anticipated increase in demand.

The Code is part o a wider package o measures which is aimed at reducing our carbonemissions rom buildings and adapting to climate change. Key parts o this package o measures, including the consultation document Building a Greener Future: Towards ZeroCarbon Development , were announced by ormer Communities Secretary Ruth Kelly on13 December 2006.

The Code builds on the introduction o Energy Per ormance Certi cates which will beintroduced or new homes in January 2008 and provides an additional, more sensitive toolby which house builders can di erentiate their per ormance in relation to energy e ciency.

Part 2a: Introducing a mandatory rating againstthe Code

What a mandatory rating against the Code would meanIn Building a Greener Future the proposal was made that, rom April 2008, all new homesshould be required to have a mandatory Code rating indicating whether they had beenassessed and, i they had, the per ormance o the home against the Code.

We believe that this will raise awareness amongst homebuyers o environmentally riendly technologies and construction methods, and that empowering consumers to comparehomes on the basis o their sustainability will encourage consumer demand and mean thatmore homes are built to higher environmental standards.

We did not propose a mandatory assessment against the Code because we recognise that,in some circumstances, homes will simply be built to minimum Building Regulations, andhence not achieve even a one star rating in the Code. Whilst we want to ensure that thiszero star rating is made clear to the potential purchaser o the home we also do not wanthome builders, and hence consumers, to pay or an unnecessary assessment. For thisreason we believe that a home builder shouldnt have to pay to go through an assessmentthat they know they are going to ail.

The response to previous consultations

In Building a Greener Future we asked the question Do you agree that all new homes should receive a rating against the standards set out in the Code or Sustainable Homes rom April 2008?

The majority o respondents (61 per cent) agreed that we should make a rating against the Codemandatory with only a small minority (8 per cent) disagreeing.

However it was clear rom consultees comments that they were unsure what exactly we wereproposing and some (25 per cent) thought it meant that an assessment against the Code wouldhave to be carried out.


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Our proposals do not mean that all new homes have to be assessed against the Code. They mean that, or every new home, a home builder would either:

employ a Code assessor to assess a home against the Code at both the design andpost-construction stages; or

download, at no cost, a zero star certi cate or standard letter clearly stating that thehouse has not been assessed against the Code.

Further in ormation on why we are not proposing a mandatory assessment is included inPart 2.b.

Q1: Do you agree that a rating (not an assessment) against the Code orSustainable Homes should be mandatory or all new marketed homes romApril 2008?

I we go ahead with this proposal, those who choose not to be assessed against theCode could potentially receive a zero star rating. This would include a statement alongthe lines o :

The Code or Sustainable Homes sets out higher standards or a range o environmental sustainability categories, including or energy/carbon dioxideemissions, water and materials. This home has not been assessed against theCode and cannot there ore be considered to meet the enhanced environmentalper ormance standards set out in that Code. New homes still have to meetminimum standards as set out in Building Regulations, but these are below thestandards set out in the Code. An assessment o the homes energy per ormance

will be shown on this homes Energy Per ormance Certi cate.

We believe that a zero star rating will be clear to consumers, ensuring they are made awareo when a home has not been designed to the higher standards in the Code. We believethis will motivate home builders to build to the Code, but where they have reasons or not

wanting to build to the Code, it will not subject them to unnecessary expense.

Alternatively instead o taking the orm o a zero star certi cate, this statement, explainingthat the home had not been assessed, could be provided in the orm o a standard letter.

A zero star certi cate or standard letter would be available to home builders ree o charge or example, it could be downloaded rom an appropriate website. The only cost

would be the time taken by the home builder to produce this certi cate/statement. Thisis estimated at 1.3m per annum and this is essentially the cost o making Code ratingmandatory. The RIA sets out a number o scenarios where this cost is negated and thepolicy becomes cost e ective.

Examples o the Code certi cate, and a possible design or a zero star certi cate andstandard letter are attached at Annex D.

A mandatory rating against the Code


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Q2a: Do you agree that where homes are not assessed against the Code orSustainable Homes, potential buyers should be given a document which clearlystates that it has not been assessed?

Q2b: Would you pre er that this document is:a) a zero star certi cate; orb) a standard letter?

The Connection between the Code and Energy Per ormanceCerti cates

As set out earlier in this document, the Code will complement the system o Energy Per ormance Certi cates (EPCs) which are being rolled out rom 1 August 2007 underthe Energy Per ormance o Buildings (Certi cates and Inspections) (England and Wales)Regulations 2007. These Regulations will require that all new homes rom 1 January 2008have an EPC providing key in ormation about the energy e ciency/carbon per ormance o the home.

The Code builds on the Energy Per ormance Certi cates in two important ways: rstly by providing a mechanism by which a home builder can more e ectively demonstratethe e orts they have undertaken to improve the energy per ormance o their homes; andsecondly by providing a broader measure o the overall sustainability o the home.

I we make it mandatory or all new homes to have a rating against the Code by April 2008then a ter that point all new homes would have to have both an EPC and a Code rating.

This makes it important that we integrate these two requirements as much as possible.Both the Code and EPCs use the Governments Standard Aassessment Procedure (SAP)calculation methodology or the energy assessment. The way they illustrate the energy per ormance o the building di ers (the EPC representing the absolute per ormanceon a ridge ratings diagram, and the Code rating illustrates per ormance in terms o apercentage improvement over Building Regulations). However, we have designed the twodocuments (the EPC and the Code certi cate) such that it will be clear to consumers thatthe two are consistent. As shown in Annex D the Code certi cate will include the ridgerating to ensure that consumers can easily read across between the Code certi cate andEPC.

The other issue to consider in making rating against the Code mandatory is that once anEPC and a rating against the Code are required it is important that a home builder (wherethey chose to have an assessment) does not have to employ two di erent organisations orindividuals to produce the two documents. This will ensure that both the hassle and cost isminimised.

In order to achieve this we have there ore concluded that it is important that by the timerating against the Code becomes mandatory, all Code assessor organisations (includingsel -employed individuals) should also be able to produce an EPC and should o er bothservices (a Code assessment and an energy assessment) as a single package, or a single ee.


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To o er this service it may mean that some Code assessors (those operating independently) will need to undertake additional training as Energy Assessors in order to be able to trade.However where a Code assessor is operating as part o an organisation that already o ersboth services or a single ee, it will be up to those organisations to decide how they deliver this service.

This proposal has no impact on Domestic Energy Assessors (those assessors who produceEPCs exclusively or existing homes) or on Energy Assessors who do not intend toundertake work where a Code assessment may be requested.

Q3: Do you agree that, be ore we make rating against the Code mandatory, weshould require that all Code assessor organisations (or sel -employed individuals)are able to provide Code and EPC services as a single package?

How potential buyers would receive a Code certi cate or zerostar ratingBy ensuring that new homebuyers are given in ormation about Code ratings our aim is toencourage developers to build more sustainable homes and or homebuyers to demandmore sustainable homes. The Code certi cate is designed to provide homebuyers with thein ormation they need to know about how their new home meets the nine sustainability categories in the Code.

Where a home builder chooses to seek an assessment (rather than providing a zero starcerti cate or standard letter), an interim certi cate would be produced at the design stage

and a nal certi cate when the home is completed. These certi cates could there ore bemade available by the home builder to potential buyers when marketing the home eithero -plan (the interim certi cate) or a ter the home has been built (the nal certi cate).

Where a home builder chooses not to have a home assessed against the Code there is aquestion about when a zero star certi cate or standard letter should be made available.

In our view, the most appropriate time to provide this in ormation to potential homebuyersis early in the home buying process, when they may be making choices between di erentproperties. This would coincide with when they are entitled to receive a copy o a HomeIn ormation Pack (HIP).

An option or enabling this would be to amend the regulations made under section163(5) o the Housing Act 2004 (currently the Home In ormation Pack (No.2 Regulations2007)) so that a Code certi cate or a statement o non-assessment (o which ever orm)becomes a compulsory document in a HIP or all new marketed homes alongside theother compulsory documents (HIP index, Energy Per ormance Certi cate, Sale Statement,Standard searches, evidence o title and, where appropriate, any additional in ormation onleasehold sales).

The advantages o including the Code certi cate in a HIP is that it ensures that thecerti cate is made available to potential buyers be ore they make a decision; that a Coderating is recognised as one o the key pieces o in ormation that buyers should see; andthat the Code certi cate is included alongside the Energy Per ormance Certi cate.



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HIPs only apply to marketed sales however, so a duty in relation to the HIP will notrequire rating or new homes that are not o ered on the open market. Furthermore, usingHIPs means that in some circumstances we will have no mechanisms to require homebuilders to give homebuyers a nal certi cate. This will occur when, or example, a homeis marketed o -plan and marketing stops be ore the point where a post-construction checktakes place. In these circumstances it is possible that the completed home may not havebeen built to the standards intended, and refected in the interim Certi cate, and that thehomebuyer does not get the standards o sustainability in their home that they thoughtthey were purchasing. This means that the bene ts expected will not be delivered by thecompleted home.

To address this we may in due course seek urther legislative powers. I we do so, thecerti cate or statement o non-assessment would still be a required document in the HIP.However the new powers would provide an independent legal basis or these documentsand ensure that the nal stage certi cate be given to any homebuyer who had received adesign stage certi cate.

Q4a: Do you agree that the Home In ormation Pack would be an appropriatemechanism or ensuring homebuyers are provided with a rating against theCode or Sustainable Homes?

Q4b: Do you think it is necessary to have legislative powers to ensure that bothdesign stage and post-construction certi cates are given to homebuyers?

Transitional arrangements When introducing these proposals, there will need to be arrangements in place to ensure

airness and to enable as many homes as possible to be built to the Code.

Because o the nature o the assessment process (which requires both a design stage andpost-construction assessment) it will not be possible to require that all homes completed

rom April 2008 have a Code rating. It would also not be air or homes already underconstruction to have to state that they hadnt been assessed against the Code when ithad not been a requirement at the point at which building work began. However, any transitional arrangement will mean that it is longer until new homes have to be ratedagainst the Code.

There are two possible ways in which the requirements set out in this document could bephased in:

through the planning process; or

through the Building Control process.

The rst option is that the requirements described above would only apply where thereis an application or planning permission a ter April 2008. This would ensure that therequirement or Code rating would only apply to homes early in the design process. Itavoids every home that is marketed in April 2008 having to have a Code rating, giventhat they are unlikely to have been designed to the Code. It would not mean that a Coderating would have to be included with the application or planning permission the rating


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would still only have to ready when the home was actually marketed. This requirement would apply whether a development ollowed the outline or detailed planning permissionroutes. In general, homes would have to start construction within three years o receivingdetailed planning permission (the reserved matters must be submitted within three years o receiving outline plannng permission).

Linking to the planning system would ensure a gradual introduction, as homes thatapply or planning permission a ter April 2008 would not all be constructed at exactly the same time. This would help ensure that there is a gradual increase in the demand orassessments, helping to ensure that there are enough assessors available.

The second option is that the requirements described above would only apply to homesor which Local Authority Building Control are given an Initial Notice by an Approved

Inspector or or which a Building Notice or Full Plans application is submitted a ter April2008. Builders have a maximum o 3 years a ter making their application be ore they haveto commence construction. This proposal would not mean that a home builder had to

produce a Code rating when submitting plans/notice to Building Control this would only be required when the home was marketed. It would ensure that home builders didnt haveto produce a Code rating or homes they are already part way through construction.

Both o these options allow or a reasonable transitional period without it being toolong. Whilst the energy part o the Code assessment aligns most closely with the BuildingRegulations, there are many parts o the Code assessment that cover matters not in BuildingRegulations; such as site ecology. It is likely that the detail needed in order to carry out aCode assessment matches more closely with the level o in ormation needed or detailedplanning permission and the reserved matters stage o outline planning permission. TheBuilding Regulations route would be more likely to capture homes urther along in the

design process, hence speeding up the transition, but this may result in homes beingcaptured that were not initially designed to the Code.

Q5a: Do you agree there should be a transitional period or the introduction o amandatory rating against the Code?

Q5b: I there is a transitional period, should this come into e ect or new homesthat either: apply or planning permission a ter April 2008; or reach the Initial Notice, Full Plans or Building Notice stage o the building

control noti cation process a ter April 2008?

Part 2.b: Other issues raised in consultation

Why not a mandatory assessment against the Code? As we have set out earlier in this document, we believe that introducing a requirement tohave a rating against the Code will have signi cant bene ts. It will help purchasers o newhomes make in ormed decisions and encourage a greater demand or more sustainablenew homes.



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A number o respondents to our consultation on Building a Greener Future assumed that we were intending to make an assessment against the Code mandatory as opposed to arating. This is not the case. The Code is a voluntary standard and there is a cost associated

with undertaking an assessment against it. Based on our existing projections o uturehome building the cost o every home having an assessment would be 56m per year. This

would only become cost e ective i costs o building to the Code ell by 20% a year, andthe market operated at 100% e ciency, both o which we consider extremely unlikely.There are some circumstances under which it may not make sense or a developer to seekto achieve a standard that is higher than current Building Regulations across the range o issues covered in the Code, or where the cost burden associated with the assessment ishard to justi y ( or example on a single dwelling development which is not seeking to gobeyond regulations and where the cost can not be shared across a number o dwellings).

A mandatory assessment would orce these developers to spend money onan assessment to be told what they already know that they have not achieved a particularlevel o the Code. It could be argued that these developers should be required to go

beyond regulations and achieve a particular level o the Code but i it was our intentionto require higher standards than we have now then we would have put these in BuildingRegulations (as we intend to do over time with the energy requirements).

Overall, the decision to go or mandatory rating as opposed to mandatory assessmentrefects the status o the Code as a vehicle or encouraging improvements in per ormanceon the part o the home building industry and providing in ormation which empowerscustomers. We believe this approach does that without imposing unnecessary andunjusti ed costs where there are good reasons or not going urther, aster.

Availability o Code assessorsSome respondents to Building a Greener Future 5 were concerned about the numbers o Code assessors available to undertake assessments. The Building Research Establishment(BRE) has been re-training Ecohomes assessors in England to become Code assessors.Training commenced in March 2007 and by the end o June 2007 there were already approximately 432 accredited Code assessors with more training events planned. BREslatest gures show that these assessors are appropriately spread across the country, takingaccount o levels o home building.

We expect that there will be enough assessors to undertake Code assessments, i we

proceed with making a rating against the Code mandatory rom April 2008, or theollowing reasons:

Ecohomes/Code assessors currently undertake an average o our assessments a year. However actual levels o activity vary widely with some assessors undertakingless and others more. One assessor has completed 60 assessments in the past yearand has registered a urther 350 assessments. So there is capacity in the system atpresent.

A signi cant proportion o new homes are built as part o housing developmentsrather than as single units. New homes in housing developments will, where they

share a design, be assessed in common rather than home by home. There ore, basedon the current average number o types o properties in a typical development, weanticipate that approximately 1000 assessments will be needed or every 15,000

5 www.communities.gov.uk/index.asp?id=1505157


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properties. In making this calculation we have discounted single unit sites, builttypically by owner occupiers, as we think that it is less likely that they will seek anassessment against the Code, partly because the cost o assessment will be higher.

I new home building were to be around 165,000 new homes (ie at about thecurrent level) in 2008, then, based on the number o di erent types o properties,

the di erent sizes o sites, and allowing or some uptake on single sites, we estimatethat approximately 22,000 actual assessments would be needed. The 432 Codeassessors already trained would have to do about 51 assessments each in a year tomeet this demand.

BRE advise us however, that in addition to the 432 current assessors approximately 50 Code assessors are currently being trained and accredited each month. It isthere ore anticipated that by April 2008 there will be approximately 900 assessorsavailable. At this point, each o these assessors would need to do about 25assessments a year i all anticipated new homes built were assessed against theCode. However, whilst there is a guaranteed minimum number o assessments aslarge parts o the social sector are required to assess against the Code, it is unlikely that every new home built will be assessed against the Code, at least in 2008.

Q6: Do you agree with our analysis o the likely demand or assessments, andthat there will be su cient Code assessors available?

Using the Code or existing homesThe Code is only suitable or new homes. It is not designed to apply to existing homes

because some elements apply to the construction process, such as the responsible sourcingo materials or key elements o the building. It is also unsuitable or existing homesbecause some o the standards required would be unrealistic to expect in existing homes

where major renovation or re-building would be required to achieve them. For the samereasons, the Code is also unsuited to re urbishments and conversions.

Certi cation bodies and the relationship with BRE At present the only certi cation body is the Building Research Establishment (BRE). Thisis because the Code is based on the BREs Ecohomes product. In return or grantingCommunities and Local Government the right to use the Ecohomes intellectual property inthe Code, Communities and Local Government granted BRE the right, on a concessionary basis, to train and accredit Code assessors, and to administer and maintain the Code.

I other organisations wanted to o er a certi cation service then they would need to seekapproval rst rom Communities and Local Government. Subject to that agreement, BREmay then o er a sub-licence agreement. The sub-licence would be likely to require that theorganisation are already accredited to the required standard or are committed to doing soin a pre-determined time period. It is expected that the organisation would be required toname the employees who are to be employed as trainers. These trainers would be requiredto be trained by BRE be ore being granted the licence to operate. BRE would charge eesto cover the initial application ee, an initial assessment, training, certi cation and on-goingassessment and a listing ee. The rates charged would be commercial rates commensurate

with the services provided by BRE and BREs rights in intellectual property contained in theCode.


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Part 3: The uture o the Code or Sustainable Homes

Updating the Code in the light o uture changesThe Code or Sustainable Homes is designed to drive up sustainability standards in home

building. When it was published in December 2006, Code Level 1 was above minimumregulatory standards and included elements o good practice in home design andconstruction.

It is already Government policy to strengthen the minimum requirements or energy per ormance in Building Regulations in 2010, 2013 and 2016 and that the Code providesthe direction or these levels. For example we proposed that by 2010 new homes wouldemit 25% less carbon than they do now in line with Level 3 o the Code. De ra have alsorecently consulted on whether Site Waste Management Plans 6 might be made mandatory.It is envisaged that over time other elements o the Code may also become mandatory minimum standards or requirements.

It will be necessary to keep the Code under review and up to date. It has been proposedthat the Code should be revised in line with these changes to building and otherregulations and that a Code Version 2 should be introduced in 2010. The Government

would consult on any changes to the Code in advance in the usual way.

Q7a: Do you agree with the principle that the Code or Sustainable Homesshould be changed to refect changes to the building and other regulations?

Q7b: Do you agree that the Code or Sustainable Homes should be revised in

light o changing Building Regulations in 2010?

Li etime HomesLi etime Homes standards were developed in the 1990s as a set o sixteen criteria whichtogether make a dwelling easier to use and adapt as a amilys needs change over time.

Where they are adopted they ensure that homes are better able to adapt to the needs o their occupants at di erent stages o their li e as they grow and as they age. They alsoensure that, when aced with a sudden crisis such as an incapacitating accident, injury orillness, the amilies living in these homes are able to make short-term adaptations to allowtime to consider uture needs, and longer-term adaptations should their wish be to remainthe amily home.

Currently, there is no requirement to adopt the Li etime Homes standards (which orm parto the health and well-being category) in the Code it is entirely up to the developer todecide where to ocus their e ort in acquiring points. However we believe there are goodreasons to change this.

We are acing a signi cantly ageing population. The Government projections show that

over the next 30 years the population aged 65 years and oveer will rise rom 9.7 million to16.5 million a 70% increase. The percentage increase is even more dramatic or older agegroups, with those aged 85 years and over rising by 149%.6 www.de ra.gov.uk/corporate/consult/construction-sitewaste/consultation.pd


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Currently the home building market is not reacting as quickly as necessary to meet thesedramatic changes. I we do not act now to make sure that the homes we are building willmeet the needs o an ageing population we will ace increasing di culties in meeting ourpopulations needs over the coming decades.

There is also some evidence that the undersupply o inclusive homes or older people isleading to people being unable to move into more suitable accommodation and that inturn is leading to under-occupation o amily homes. This blocks the supply chain, reducesfexibility and movement in the market and drives prices up. Wider uptake o Li etimeHomes standards would allow older people to release large amily homes into the marketthus increasing the supply o amily homes and a ordability.

The cost o adapting homes which were not built to Li etime Homes standards, or exampleor use by disabled people, is substantial. Encouraging greater uptake o the Li etime

Homes standards rom design stage will reduce the cost o adaptations, as and when they are needed, and also reduce care costs.

We believe that including Li etime Homes standards as an essential element in the Codeor Sustainable Homes will achieve our aim o encouraging home builders to built to

Li etime Homes standards, and, over-time, make it the norm to do so, without resorting toadditional regulatory intervention. It will contribute directly to our delivery o sustainablecommunities and will orm an important element o our Strategy or Housing or an AgeingPopulation.

In order to achieve the transition to Li etime Homes standards in a manageable way,encouraging change without imposing undue cost, we propose to make Li etime Homesstandards a mandatory element at progressively lower levels o the Code over time. This

would mean that they would become a mandatory element: or a 6 star rating in the Code rom April 2008;

or a 4 star and above rating rom April 2010; and

or a 3 star and above rating rom April 2013.

Q8a: Do you agree that Li etime Homes standards should be made mandatoryin the Code?

Q8b: Do you agree that Li etime Homes standards should be made mandatoryat progressively lower levels o the Code, starting with level 6 in 2008, level 4in 2010 and level 3 in 2013?


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Annex A

Consultation questionsQ1: Do you agree that a rating ( not an assessment) against the Code or Sustainable

Homes should be mandatory or all new marketed homes rom April 2008?Q2a: Do you agree that where homes are not assessed against the Code or Sustainable

Homes, potential buyers should be given a document which clearly states that it hasnot been assessed?

Q2b: Would you pre er that this document is:

a) a zero star certi cate; or

b) a standard letter?

Q3: Do you agree that, be ore we make rating against the Code mandatory, we shouldrequire that all Code assessor organisations (or sel -employed individuals) are able toprovide Code and EPC services as a single package?

Q4a: Do you agree that the Home In ormation Pack would be an appropriate mechanismor ensuring homebuyers are provided with a rating against the Code or Sustainable

Homes?

Q4b: Do you think it is necessary to have legislative powers to ensure that both designstage and post-construction certi cates are given to homebuyers?

Q5a: Do you agree there should be a transitional period or the introduction o a mandatory rating against the Code?

Q5b: I there is a transitional period, should this come into e ect or new homes that either:

apply or planning permission a ter April 2008; or

reach the Initial Notice, Full Plans or Building Notice stage o the building controlnoti cation process a ter April 2008?

Q6: Do you agree with our analysis o the likely demand or assessments and that there

will be su cient Code assessors available?Q7a: Do you agree with the principle that the Code or Sustainable Homes should be

changed to refect the changes to the building and other regulations?

Q7b: Do you agree that the Code or Sustainable Homes should be revised in light o changing Building Regulations in 2010?

Q8a: Do you agree that Li etime Homes standards should be mandatory in the Code?

Q8b: Do you agree that Li etime Homes standards should be mandatory at progressively lower levels o the Code starting with level 6 in 2008, level 4 in 2010 and level 3 in2013?


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Annex B: The consultation criteriaThe Government has adopted a code o practice on consultations. The criteria below apply to all UK national public consultations on the basis o a document in electronic or printed

orm. They will o ten be relevant to other sorts o consultation.

Though they have no legal orce, and cannot prevail over statutory or other mandatory external requirements (eg under European Community Law), they should otherwisegenerally be regarded as binding on UK departments and their agencies, unless Ministersconclude that exceptional circumstances require a departure.

1. Consult widely throughout the process, allowing a minimum o 12 weeks or written consultation at least once during the development o the policy.

2. Be clear about what your proposals are, who may be a ected, whatquestions are being asked and the timescale or responses.

3. Ensure that your consultation is clear, concise and widely accessible.

4. Give eedback regarding the responses received and how the consultationprocess infuenced the policy.

5. Monitor your departments e ectiveness at consultation, including through the use o a designated consultation co-ordinator.

6. Ensure your consultation ollows better regulation best practice, includingcarrying out a Regulatory Impact Assessment i appropriate.

The ull consultation code may be viewed at www.cabineto ce.gov.uk/regulation/consultation/code/index.asp

Are you satis ed that this consultation has ollowed these criteria? I not, or you have any other observations about ways o improving the consultation process please contact:

Albert JoyceCommunities and Local Government Consultation Co-ordinator,Zone 6/H10

Eland House,Bressenden PlaceLondon,SW1E 5DUor by e-mail to: [email protected]

Please note that responses to the consultation itsel should be sent to JeannetteHenderson; contact details shown within the main body o the consultation.


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Annex C: Partial Regulatory Impact Assessments (PRIAs)

Mandatory rating against the Code

Summary: Intervention and Options

What is the problem under consideration?Why is government intervention necessary?

New homes make a signi cant contribution to carbon dioxide emissions and climatechange. They also have a wide range o other environmental impacts, or examplethrough the materials used to construct them and the water used by the occupants.There are potential market ailures because the externalities o a homes environmentalimpact are not taken into account by home builders, and because there is o ten a lacko in ormation available buyers are o ten unable to judge the sustainability o a newhome. Intervention is necessary to tackle this.

What are the policy objectives and the intended e ects?

The Code builds on the introduction o Energy Per ormance Certi cates by providing anational ramework within which house builders can improve the overall sustainability o new build homes. It provides an e ective mechanism by which builders can berecognised or going beyond current Building Regulations on energy and providesin ormation on other aspects o sustainability which are critical to limiting environmentalimpact. Making it mandatory to have a rating against the Code will ensure thatin ormation is available on all new homes and which will allow purchasers to makemore in ormed choices which in turn should encourage home builders to take accounto environmental externalities in the design and construction o new homes.

What policy options have been considered? Please justi y anypre erred option.

Two options have been identi ed: do nothing (retain the Code as a voluntary standard);and introduce a mandatory rating against the Code. The do-nothing option is not expectedto have as substantial impact on the in ormation market ailure as introducing mandatory rating. The scenarios under which mandatory rating is cost e ective are consideredrealistic. An alternative option o mandatory assessment was considered, but giventhe current costs o meeting the Codes standards, this would orce those developers

who choose not to meet those standards (which are additional to Building Regulationsstandards) to spend money on an assessment to be told what they already know.

When will the policy be reviewed to establish the actual costs andbenefts and the achievement o the desired e ects?

Uptake o the Code will be monitored on an ongoing basis (quarterly). In 2010, when

Building Regulations standards or energy e ciency will rise, we will also undertakea review o the administrative cost o obtaining a zero star certi cate or statement o non-assessment.


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Summary: Analysis & Evidence

C O S T S

ANNUAL COSTS Description and scale o key monetised costs by maina ected groups

Capital costs o construction (assuming 2% annual reduction) andadmin cost o assessment/non-assessment, borne by developers/ land owners and (where consumers are willing to pay) buyers seetable 2 in main body o RIA.

One-o (Transition) Yrs

Average Annual Cost (excluding one-o )

5.2m Total Cost (PV) 77.7m

Other key non-monetised costs by main a ected groups

B E N E F I T S

ANNUAL BENEFITS Description and scale o key monetised bene ts bymain a ected groups

Present value o economic and environmental bene ts assuming20% improvement in market e ciency (see Table 2 in main body o

the RIA).

One-o Yrs

Average Annual Bene t(excluding one-o )

4.3m Total Bene t (PV) 64.7m

Other key non-monetised bene ts by main a ected groups

Wider sustainability bene ts e.g. reduced impact rom fooding, recycling, waste management, reducedwater consumption/better management etc.

Key Assumptions/Sensitivities/Risks Key risk = no additional take-up, but xed admin cost o 1.3m.Results are sensitive to (a) speed o cost reduction over time, (b) level o admin cost, (c) li etime in whichbene ts accrue, (d) market e ciency improvement achieved (i.e. % developers choosing to build to higherstandards because o better in ormation)

Price BaseYear 2008

Time PeriodYears 15

Net Bene t Range (NPV) -1.3m to +129m

NET BENEFIT(NPV Best estimate) -0.9

What is the geographic coverage o the policy/option? England

On what date will the policy be implemented? April 2008

Which organisation(s) will en orce the policy? BRE/TSOs

What is the total annual cost o en orcement or these organisations? 0

Does en orcement comply with Hampton principles? YesWill implementation go beyond minimum EU requirements? No

What is the value o the proposed o setting measure per year?

What is the value o changes in greenhouse gas emissions? 1.4m (0.09m/yr)

Will the proposal have a signi cant impact on competition? No

Annual cost (-) per organisation(excluding one-o )

Micro Small Medium Large

Are any o these organisations exempt? No No N/A N/A

Impact on Admin Burdens Baseline (2005 Prices) (Increase Decrease)Increase o 1.3m Decrease o 0 Net Impact 1.3m

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Title o Proposal1. Assessing the costs and bene ts o making a rating against the Code or Sustainable

Homes mandatory rom April 2008 or all new homes built in England.

Purpose and Intended E ect o MeasureObjective

2. This proposal builds on the mandatory provision o Energy Per ormance Certi catesby providing a national ramework within which home builders can work to improvethe overall sustainability and impact on the environment o new build homes.

3. It goes urther than EPCs in the area o energy e ciency by providing an e ectivemechanism by which home builders can be recognised or making improvements

which go beyond current building regulations.

4. It also provides in ormation on a new home which covers a wide range o otheraspects o sustainability which are not mandatory in the Building Regulations but arecritical to limiting the environmental impact o housing.

5. The Code was introduced in April 2007 as a voluntary national standard. The proposalexplored in this paper is to make it mandatory or all new homes to have a ratingagainst the Code rom April 2008.

6. This will ensure that all prospective purchasers o new build homes are givenindependent in ormation, which they can trust, about how the home they areconsidering buying per orms against the Code. It will also allow home builders todi erentiate the standards o their homes rom the standards o others.

7. It is there ore anticipated that this proposal ensuring new homes have such a rating will increase consumer demand or more sustainable homes and encourage industry to build more sustainable homes, because consumers will place a value on greatersustainability.

8. The Code is currently only applicable in England and a mandatory rating against theCode will likewise only apply in England.

Background

9. From January 2008, Energy Per ormance Certi cates or new homes will ensurethat every purchaser has in ormation about the energy e ciency o their home andpractical suggestions or making it even more e cient. The Code builds on this by providing a ramework or home builders to gain recognition or going beyond currentBuilding Regulations on energy e ciency, and sets standards or key aspects o sustainability other than energy.

10. Because all new homes already reach a high level o per ormance on the EPCscale, even big improvements on top o current Building Regulations dont registersigni cantly. The energy element o the Code is based on percentage improvementsover Building Regulations so big improvements will be clearly visible to consumers.


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11. The Code also provides a means o assessing the wider sustainability o a home.In addition to carbon emissions, the housing sector also creates a range o otherenvironmental impacts, or example through ine fcient use o water (which also hasan indirect impact on carbon emissions used to supply, heat and treat it), generation o

waste, and use o polluting materials.

12. Although great progress has been made in improving the sustainability o buildingsand their contents through a range o initiatives in recent years, there is increasingrecognition o the urgent need to take more radical action.

13. The Building Regulations set mandatory minimum standards or design andconstruction o buildings, which include aspects o health, sa ety and environment,and are updated regularly (approximately every ve years, although energy e ciency/carbon dioxide emissions has been more requent) to refect changes in requiredstandards and developments in technology. On their own, however, they do not coverall aspects o sustainability. They also o er no incentive or exceeding the minimum

standards, no in ormation on when minimum standards have been exceeded, o erno stimulus to innovation, and o er no mechanism through which we can increaseconsumer awareness and demand or more sustainable housing.

14. Homes built to the minimum standards in the Code, will have and/or will provide theacilities to encourage:

improved energy e ciency (and there ore lower carbon emissions)

reduced consumption o potable water

reduced sur ace water runo

reduced environmental impact o materials

improved site waste management and adequate space or accessible waste storage.

15. They will also have, and/or provide the acilities to encourage:

improved waste recycling provision

improved consideration o food risk during citing and design

more responsibly sourced materials reduced pollution impact

design eatures which support the health and well-being o occupants

design eatures which assist in more sustainable management o the home,including amenities or disabled people

more positive impacts on the ecological value o the site

reduced waste rom the construction process

consideration o the surrounding community during construction

reduced environmental impacts during construction.

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16. Homes built to higher levels o the Code, represented by star ratings, will have to doprogressively more in these areas, with xed levels o attainment or energy and water.

17. The introduction o the Code has given the building industry more certainty over thelikely direction o travel or integrating sustainability o new homes into regulationover time. As a result home builders will also be better able to actor sustainability measures into land purchase prices and will there ore be inclined to integrate suchmeasures into new homes.

18. The development o the Code which is based on Ecohomes was overseen by aSenior Stakeholder Group which included representatives o the construction industry and environment groups. The initial proposal to make a rating against the Codemandatory was consulted on by Government as part o the Building a Greener Future:Towards Zero Carbon Development consultation in December 2006. The majority o respondents (61 per cent) were in avour o introducing a mandatory rating, whilstonly 8 per cent disagreed.

Rationale or government intervention

19. The recent Stern review tells us that global warming could shrink the global economy by 20 per cent. It states, however, that i we take action now, it could cost just1 per cent o global gross domestic product. Due to the signi cant contribution thatconstruction and use o our homes makes to the level o carbon dioxide emissions(27 per cent in 2004), ailure to act now in the new homes sector will contribute togreater costs o damage rom climate change in the longer term. Whilst new buildhomes are a relatively small proportion o the total housing stock, i we build thehomes we need, then by 2050, as much as one-third o the total housing stock willhave been built between now and then.

20. However, it is also vital that we take action on sustainability issues other than justthe carbon emissions associated with living in a home. For example, the responsiblesourcing o materials protects endangered orests; building homes that make it easierto recycle waste will reduce the amount we send to land ll; and protecting andenhancing the ecological value o sites, or building on sites o low ecological valueensures we protect our wildli e and areas o natural beauty. The Code takes issuessuch as these into account.

21. Within the market or new housing there are a number o market ailures relevant tothe environment and sustainability. There are two that are o particular importance.

22. Firstly, the wider social costs (externalities) o a homes environmental impact aregenerally not taken into account within private decisions by developers or buyers. Forexample, home owners are not required to pay the ull costs they impose on society (including uture generations) and so have little incentive to minimise their emissionsor live sustainably, though as awareness o sustainability rises this may change overtime. Similarly, home builders do not ace the ull environment costs to society o the houses they build and will there ore build to lower environmental standardsthan is best or society as a whole. This externality applies to all o the sustainability

areas covered by the Code, however, it is hard to put an accurate nancial value onthe bene ts other than or energy and water. This is partly because o an inherentdi culty in valuing these bene ts, and partly because developers have some fexibility


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in which elements o the Code they choose to incorporate.

23. Secondly, buyers are o ten unable to judge the quality or sustainability o homes there is imper ect in ormation in the market. Even i buyers were prepared topay more or a sustainable home then they have a lack o in ormation and signalsto decide when a home is truly sustainable. Providing such transparency will helpconsumers develop the market or more sustainable homes, and enable developers todistinguish their product in sustainability terms and enable consumers to understandbetter the sustainability per ormance o new homes.

24. The Code or Sustainable Homes does not en orce a single standard o sustainability.However, by setting a common ramework and comparable standards, raisingawareness and improving the amount o in ormation available, it would help toaddress the lack o in ormation. The more widespread the awareness and use o theCode then the stronger this e ect will be. A mandatory rating against the Code willextend the coverage o in ormation about sustainability o new homes, and the risks

and justi cation or the use o particular technologies.25. This in ormation can also help overcome cultural barriers in public acceptability,

which has been an issue or some renewable technologies, such as wind 7. With morein ormation about the wider implications o their actions it will urther encouragepeople to make responsible choices, which may begin to address the externality market ailure as well.

Consultation

Within government26. When developing the Code or Sustainable Homes consultation within government

on the proposed Code was undertaken by the ormer ODPM and continued underCommunities and Local Government. Other Government Departments (and Agencies),including the Department or Environment, Food and Rural A airs, Department

or Trade and Industry, the O ce o Government Commerce and the Environment Agency were also represented on the Codes Senior Steering Group (SSG).

27. During the development o the Code it was agreed that a rating against theCode should be made mandatory rom April 2008, depending on the outcome

o consultation as part o Building a Greener Future , and a urther more detailedconsultation (o which this RIA orms a part).

28. When developing this consultation paper and RIA other Government Departments andthe SSG were invited to input and all Government departments have been consultedon the proposals.

7 The Stern Review highlights the role o in ormation policies in improving public acceptability, with examples in wind,nuclear and hydrogen vehicles.

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Public consultation

29. Likewise, when developing the Code or Sustainable Homes, public consultation wasundertaken, including with the Senior Steering Group.

30. In Building a Greener Future: Towards Zero Carbon Development we asked whether

all new homes should be required to have a mandatory Code rating, indicating whether they have been assessed and the per ormance o the home against the Code.

31. The majority o respondents (61 per cent) agreed that a rating against the Code shouldbe made mandatory with only 8 per cent disagreeing.

Options32. Two options have been identi ed:

A) Do nothing (retain Code as a purely voluntary standard)

B) Introduce a mandatory rating against the Code or Sustainable Homes

33. It is di cult to demonstrate the true potential impact o a mandatory Code rating inthe RIA due to the di culties in predicting what uture uptake o the Code will be,either i the Code remains voluntary or i rating is made mandatory. Furthermore,there is little evidence to indicate how buyers value sustainability and thus howdevelopers will gauge the impact on their pro ts o improving the sustainability o the homes they build. The modelling on which the RIA is based there ore examinesdi erent scenarios based only on whether the market operates more e ciently witha mandatory rating due to increased in ormation and awareness o sustainability. Inparticular, it illustrates how developers might respond to the way that costs o buildingto higher Code levels might all over time. It then compares these costs to the bene ts

rom building more sustainable homes.

35. Apart rom energy and water, many o the wider bene ts o sustainability cannot benancially assessed and are not included in the modelling or example the bene t

o preserving local ecology. This means that the bene ts are mainly quanti ed interms o lower energy and water bills, and rom an estimate o the value o the carbonsavings, though it excludes the bene ts attributed to raised Building Regulationsstandards or energy e ciency, which are captured in the nal RIA or Building a Greener Future . The modelling assumes that a proportion o homebuilders will,

when the marginal bene ts (essentially energy and water bill savings) exceed themarginal costs o construction (per unit) at any level, choose to build to that Codelevel. It assumes that the proportion that choose to do this when rating is mandatory

will be higher than when it is voluntary, as more in ormation about the impact o sustainability improves market e ciency.

36. The key di erence between a voluntary and a mandatory rating is that when rating ismandatory there is an administration cost associated with producing a certi cate, even

when no action is taken to build more sustainably. The model explores what scenarios would lead to this administrative cost being reduced or even exceeded by the overallbene t rom building more sustainable homes. In doing so it identi es the risksassociated with making Code ratings mandatory. It does not attempt to predict whatuptake o the Code will be, and whether the proportions o homes built to di erentlevels o the Code will change.


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37. We are aware that this proposal will create some additional burdens or home builders,and will look to identi y compensatory simpli cations prior to implementation. I youhave any proposals or simpli cation please noti y them through the Better RegulationExecutives simpli cation portal at http://www.betterregulation.gov.uk.

Option A Do nothing

38. The do nothing option is the baseline against which Option B is measured. Ite ectively represents business as usual. This means that i you choose to have a Codeassessment then you have to pay or this assessment, but that i you dont choose tohave an assessment no costs are incurred.

39. Take-up o the Code standard is based on the current annual number o assessmentsunder the Code (assumed to be equivalent to previous Ecohomes uptake), and thecurrent proportion o homes achieving di erent levels o sustainability per ormance.

As we have no certainty over uture uptake a number o scenarios are modelled, toenable comparison with Option B on a like- or-like basis.

40. The overall impact assumes that the costs o building to the Code all over time, withsensitivity testing around the speed o cost reduction, as well as assumptions about

what proportion o home builders choose to build more sustainable homes (assumingsome will do so where the increased cost o building equals the marginal bene tgained rom building more sustainably). When the Code is voluntary this proportionis assumed to be relatively low, as it has less impact in addressing the in ormationalmarket ailures.

Option B Mandatory Rating against the Code

41. Option B involves the introduction o a mandatory rating against the Code. This does

not mean that a home builder has to pay or an assessment on every new home built,but that where they choose not to have an assessment they will still have to make arating available to a potential buyer, in the orm o a zero star certi cate or statemento non-assessment. This involves an administrative cost, or example or the time takento produce this certi cate or statement. This is estimated at 1.3m per annum and isessentially the additional cost to society o making Code rating mandatory.

42. For the purposes o this RIA, as in the do nothing option, the same sensitivities oncost reductions have been applied and the same principle that some proportion o builders will adopt higher standards where there is a net bene t per dwelling tobuilding to that standard (in terms o additional construction cost against ongoingbene ts rom lower utility bills). The key di erence is that the proportion ollowingthis behaviour is assumed to increase over and above the do nothing case, asawareness o the Code will have higher market penetration and is more likely toimprove market e ciency as buyers are able to make more in ormed, responsiblechoices and developers are better able to respond.

43. The analysis there ore does not represent what we hope or expect uptake o the Codeto be when rating is mandatory, but looks instead at what scenarios are needed tojusti y the administration cost, and what the risks are.

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Alternative options considered

44. An alternative option would be to make assessment against the Code mandatory.This would mean that every new home would have to pay or an assessment tobe carried out against the Code, no matter whether they simply intend to build tominimum Building Regulations standards. E ectively this would mean that instead

o downloading a zero star certi cate or ree, home builders would have to pay oran assessment be ore receiving a zero star certi cate. This would include homes onsingle and smaller sites (where the assessment costs per house are likely to be higher)as well as larger sites. Based on our projections o uture house building the cost o assessment would be 56 million per year, or 836 million over the whole period inpresent value.

45. This may lead to greater market e ciency, and hence higher uptake o the Code.However, it would only become cost e ective to make assessment mandatory whencosts o building to the Code ell by about 20 per cent per year, and the marketoperated at 100 per cent e ciency ie all builders will adopt higher standards

where there is a net bene t per dwelling to building to that standard (in terms o additional construction cost against ongoing bene ts rom lower utility bills). As bothassumptions are considered unlikely, this alternative option has been rejected as beingtoo burdensome.

Costs and Bene ts

Sectors and groups a ected

46. Many sectors o the construction industry will be a ected by the introduction o amandatory rating against the Code. In particular, it will a ect large and small homebuilders, manu acturers o sustainable technologies and homebuyers. To a lesserextent it will a ect estate agents.

Home builders

47. At present, under a voluntary Code, home builders can choose whether to assess theirdevelopments against the Code, and there ore whether they are prepared to incur theassociated administrative costs.

48. Home builders are able to choose which Code level they aim or, and are in control o both the admin costs (costs associated with assessment) and the policy costs (costsassociated with building more sustainably) they incur. Over the longer term, thoseintending to implement the Code may seek to o set these costs through making lowerbids or land purchase, although under a voluntary Code, strong competition or landmay make it di cult or individual developers to pass on these costs.

49. Our proposals to make a rating against the Code mandatory will still mean that havingan assessment against the Code is voluntary; home builders do not need to pay tohave an assessment o their new homes. However, i home builders decide not tohave an assessment they will have to produce a clear statement (either a zero starcerti cate or a statement o non-assessment) which they provide to the homebuyer atan appropriate point in the home buying process. This aims to drive up demand orCode rated homes amongst homebuyers.


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50. The policy costs o this would still be controlled by the home builder. They decide whether to build to the Code standards. However there would be a minimaladministration cost associated with producing the proposed zero-star certi cate orstatement o non-assessment. This standard document would be able to download

rom an appropriate website and the home builder would need to download and printa copy or each home they sell. It is envisaged that some developers o smaller sites

would take this option rather than building to the higher sustainability standards o the Code and paying or an assessment.

51. In a world where consumers are becoming increasing environmentally conscious,and demanding higher sustainability per ormance in their goods and services, homebuilders should be able to bene t in terms o competitive di erentiation by marketingtheir per ormance against the Code. Recent research by the Sponge Sustainability Network suggested that there is a correlation between belie s about the e cacy o sustainable homes in combating climate change and belie s about the nancial pay-o o sustainable eatures.8 However, the evidence here is not robust enough to have

made assumptions about the nancial premium or sustainable homes.

Race equality assessment

52. A mandatory rating against the Code or Sustainable Homes should not have any impact on race equality.

Health impact assessment

53. Building homes to Code standards should, over the long term, have some positivee ects on residents health but these are not likely to be large or quanti able.

Rural considerations

54. There should not be any speci c rural considerations associated with this policy.

Breakdown o costs and benefts

Assumptions and Uncertainties

55. The rate o construction o new build homes has been assumed in line with ourprevious home building aspirations, increasing to 200,000 net additions by 2016.

56. 15 years o additional home building has been assumed in calculating the total netpresent costs and bene ts. This 15-year period was chosen to provide a long enoughhorizon to refect potential changes in the market whilst reducing the uncertainties o

orecasting too ar into the uture.

57. A period o 20 years has been used as the basis or the li etime o bene ts or eachhome built to Code standards. This gure was chosen to refect the average li etime o the technologies needed to meet the Code levels be ore they need to be replaced.

8 www.spongenet.org/li estyle/index.php?page=news&news_id=101

Annex C


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58. The baseline rate o assessments has been assumed to ollow current assessment ratesunder Ecohomes:

Public sector 24,000/yr; and

Private sector 3,000/yr (equivalent to 2 per cent o private new build).

59. The model is sensitive to the level o administrative costs o assessment and ratingagainst the Code. An average assessment ee o 218 is assumed, based on an averagecost excluding single sites, or example built by sel -builders, rom whom we do notexpect uptake o the Code to be high, partly due to the higher cost o assessment.

60. Two man days (at a value o 280) has been assumed or gathering in ormation by developers to eed into an assessment. In ormation gathering is required or eachdi erent home design speci cation within a development. We have assumed a mix o up to three types per development, generating an average cost per dwelling o 19.

61. Where a zero star certi cate/statement o non-assessment is obtained it is assumedto be ree to obtain and only have a cost in terms o the time taken to obtain thecerti cate/statement and make it available to a potential buyer. The conservativeassumption has been made that this takes hal an hour or each dwelling at a cost o 20 per hour.

62. There are considerable uncertainties over the levels o sustainability per ormance thathome builders will aim to achieve in the private sector. This analysis, in which uptakeo private sector Code assessments is linked to ongoing costs and bene ts o homes,is consistent under a voluntary Code rating with the proportions achieved under

Ecohomes. These are as ollows: Level 1 83 per cent

Level 2 15 per cent

Level 3 2 per cent

Level 4/6 0 per cent (not applicable under Ecohomes)

63. The Ecohomes experience is equivalent, in our modelling, to 5 per cent o themarket working e ciently, where developers build to Code levels where thereis a positive net bene t. The market working e ciently, in this context, means

when home builders will choose to build to the Code when the marginal bene ts(essentially energy and water bill savings) exceed the marginal costs o constructionand assessment (per unit) at any level. The assumption is valid i , or example,homebuyers are prepared to pay extra up- ront or a home that will save them money in the longer term, or pay extra because they place a value on sustainability. It is notassumed that home builders have to actor in the social bene t ( or example romreduced carbon emissions) to this bene t analysis, as it is uncertain that they will becompensated or this. This proportion has been adopted in the modelling to representthe do nothing base case, with the proportion under a mandatory rating increasing to

20 per cent, with sensitivities tested at other rates.


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64. Whilst these uture estimates are somewhat unrealistic (or at least unknown) and likely to be conservative, we do not have robust data to model expected uture uptake, andthere ore the model does not aim to predict what uptake will be.

65. The assumption o 5 per cent market e ciency is low to refect experience to date,but also our understanding that the bene ts rom lower utility bills do not necessarily fow to the home builder through prices, as prices are determined mostly by thesecond-hand market and are only likely to be infuenced by developers i buyersare willing to pay a premium or more sustainable homes. We do not yet know howe ective the Code will be as a signal in the market, or indeed what value consumers

will put on it, and how strong an incentive e ect it will have on developers or thisreason conservative assumptions have been made. I homebuyers were prepared topay more or more sustainable homes then this gure would be likely to rise.

66. In monetising the carbon savings we have assumed the social cost o carbon to be 70per tonne in 2000 prices 9.

67. We have used a standard fat rate or energy prices over time.

68. The policy costs (costs o achieving di erent Code levels) are based on the Refned and Updated Cost analysis o The Code or Sustainable Homes undertaken by CyrilSweet in June 2007 or Communities and Local Government and a Communities andLocal Government commissioned study o potential energy costs and bene ts o meeting higher energy standards. 10 These two studies build on the work undertakenby Cyril Sweet or English Partnerships and the Housing Corporation in 2006 Cost

Review o the Dra t Code or Sustainable Homes and was updated to take into accountthe nalised Technical Guidance which underpins the Code.

69. The implications o meeting each Code level are presented in comparison to the costso a baseline home (eg a Building Regulations compliant home). Costs are presentedon a per dwelling basis.

70. The analysis represents an estimate o the total costs to a contractor, includingmaterials, plant and labour, preliminaries, overheads, contingencies, pro t, and design

ees. The models relate to the construction o the dwellings only. Detailed exclusionscan be ound within the Cyril Sweett report.

71. The costings are based on a home builder with a trading turnover o 5,000 to 10,000dwellings per annum. It should be noted that the policy costs will vary according tothe size o the home builder (which will a ect purchasing power), and the size o developments undertaken (larger developments will bring economies o scale).

72. A key assumption impacting on the overall cos

the future of the code for sustainable homes - making a rating mandatory

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