What is the government’s zero carbon building strategy and how could it affect the BTR sector?

It has recently been brought back into the spotlight by the devastating flash floods in Germany and Belgium, there has been a big shift from governments around the world – and local authorities within countries – to push for zero carbon building.

In the UK, it's well-known that the building and construction sector is one of the biggest emitters, with the built environment responsible for around 40% of the UK's total carbon footprint.

With this in mind, steps are being taken to push for more zero carbon homes to help the UK Government reach its net zero carbon targets.

The Government was originally set to unveil its ‘heat and buildings strategy’ in mid-July, before Parliament’s lengthy summer recess and months ahead of the COP26 UK summit being held in Glasgow from October 31-November 12.

However, according to Sky News, disagreements inside Government means talks have stalled and publication will instead be delayed until autumn.

Ministers were due to reveal plans on how Britain will decarbonise central heating systems in homes and offices – which, when combined, make up a third of the UK’s total emissions. Sky News, though, has reported that a Whitehall standoff over the cost of the plans means this is now not expected until at least September.

It is one of a number of things that needs to be ironed out in the early autumn and combined together in a single Net Zero Strategy, before the UK hosts the crucial and much-awaited UN climate change conference at the end of October.

Domestic plans to lower emissions from buildings are set to be announced later this year, with a cut-off date of 2035 for the installation of conventional gas boilers, after which they will be outlawed. But the Government is facing a backlash from its own backbenchers over the plans, with negotiations currently locked over the best way of incentivising the public to change to lower-carbon alternatives, including heat pumps and hydrogen boilers. However, there is as yet no consensus over the nature of these incentives, nor how much the Treasury will be subsidising them by.

Caterina Brandmayr, head of climate policy at the Green Alliance, told Sky News the delay would damage attempts to decarbonise.

“Given the climate crisis, we really should be moving as fast as we can. Any delay is not helping with economic opportunities. The sooner we can get started the sooner we can ensure the recovery is more resilient. Delaying that action is undermining the ability to realise those opportunities,” she commented.

She added: “The net zero review is an opportunity for the Treasury to show it wants to play a central role and support other departments.”

Downing Street has insisted that the Government is ‘determined to keep bills low, and that is a priority’ when replacing boilers. It says that ‘targeted measures’ would be used to encourage people to switch to lower carbon and more efficient heating systems, to ensure the transition is fair, affordable and practical.

There has been no word yet on when the heat and buildings strategy will be unveiled.

The Future Homes Standard – which is set to ensure that all new homes in England are futureproofed with low-carbon heating systems and high levels of energy efficiency – is earmarked to come into effect in 2025. As a result, existing homes would also be subject to higher standards, but homeowners would only be affected if they are planning on making thermal upgrades or building an extension. The Government’s spring statement in 2019 saw first mention of the Future Homes Standard, with a consultation period following. Alongside its response to the first consultation in January 2021, it announced a second consultation, which ended in April.

The full details of the standard are yet to be mapped out, but it’s expected that a full technical specification for the Future Homes Standard will be consulted on in 2023, with the necessary legislation introduced in 2024, ahead of implementation in 2025.

The Future Homes Standard is a set of standards that will work alongside the Building Regulations to make sure that new homes built after 2025 will produce 75-80% less carbon emissions than homes delivered under current regulations. Once the new legislation is passed, all new homes would have to be built according to these new standards.  

This isn’t the first time the Government has attempted to introduce new standards – it previously introduced the Zero Carbon Homes Standard (which was abolished in 2015) and the Code for Sustainable Homes (scrapped in the same year), to help assess and certify the sustainable design and construction of new homes.

One part of the private rented sector that appears to be leading the way on net zero carbon building is Build to Rent, which sees purpose-built rental accommodation with various perks and amenities built in city-centre and town locations, funded by large-scale institutional investors.

Legal & General, one of the early adopters of the model in the UK and one of the largest players in the market, has previously pledged that all of its new stock will be ‘net zero carbon enabled’, while other big names in the fast-growing sector – such as British Land – have made similar pledges.

Build to Rent schemes are often built using innovative techniques – sometimes involving modular and off-site construction – which in theory should make them much more environmentally-friendly.

Big players in the market are also looking at ways in which they can decarbonise heating now, so they are ahead of the proposed incoming regulations surrounding heating and gas boilers.

We can return again to Legal & General, which last year announced its investment in The Kensa Group, one of the UK’s largest players in the ground source heat pump technology sector, as it scaled up its investments in addressing decarbonisation. 

The firm has already taken steps to improve its green credentials, with an existing clean energy investment portfolio, including low carbon heat, transport and power generation, as well as an increased stake in Pod Point, one of the UK’s largest electric vehicle charging companies.

As most Build to Rent homes are newly built, it seems inevitable that this sector will need to take the lead on building homes that address the above issues, while work goes on to decarbonise existing stock.

There are large-scale challenges at play with the latter goal, given that it’s said around 23 million homes in Great Britain use mains gas (which is very carbon intensive) as their heating fuel. By comparison, two million homes are electrically heated (much lower carbon but with high running costs) and the remaining two million use heating oil or other fossil fuel systems (both carbon intensive and with high running costs).

The Government has committed to net zero carbon emissions by 2050 – and has repeated this pledge many times – and reducing the carbon emissions of housing will be vital in reaching this goal.

As the private rented sector continues to grow and house more people, and Build to Rent continues to emerge as a major sub-sector, there will be pressure on developers, landlords, agents, construction firms and retrofitters to ensure that the UK’s housing stock goes green.