Appalling energy efficiency results revealed for London’s buildings

The geography of fuel poverty: where you live determines how high your fuel bill is.

Despite London’s world-class status, exorbitant property values and all the foreign cash flowing into its property market, over a third of its non-domestic buildings and a quarter of its homes have the lowest energy efficiency ratings.

[NB: This article first appeared on the Fifth Estate website on 3 August]

The revelation comes from a survey of Energy Performance Certificates, the official way of measuring the energy efficiency of buildings in the UK, that have been issued in the last six years, undertaken by the Association for the Conservation of Energy.

The proportion of homes meeting the different levels of energy performance in London.

Understanding Energy Performance Certificates

By studying the certificates ACE found that 37 per cent of non-domestic buildings had been rated E or lower since 2009 and only around a third (34 per cent) had performance ratings of C or higher.

In the housing sector, 830,000 were awarded the lowest energy efficiency ratings of E, F or G, with 18,000 homes in the bottom two extremely poor categories.

In the same period, foreign investors have apparently bought £100 billion (AU$175.2b) of London property and London has become the most expensive capital in the world for employers to house their staff.

But none of this cash has “trickled down” to help improve the building stock used by the majority of London’s inhabitants.

Pedro Guertler, the research director at ACE responsible for the study, said: “We were shocked to discover that a quarter of London’s homes and 37 per cent of its workplaces have the very worst energy ratings and therefore waste a large proportion of their energy.

“Millions of the capital’s homes and businesses still stand to gain from energy efficiency upgrades.”

He gave a striking example: “If shops cut energy costs by 20 per cent, it would be the equivalent of a five per cent increase in sales.”

Commercial and industrial buildings make up about a quarter of London’s building space but consume almost half of its energy, resulting in them emitting about 42 per cent of the city’s carbon emissions.

The £7.9 billion fuel bill

London’s homes and workplaces spend upwards of £7.9 billion (AU$13.8b) on energy bills every year, £4 billion (AU$7b) of which is paid by workplaces. This is money that leaves London’s economy. ACE makes the point that, by contrast, improving efficiency and cutting energy costs actually represents an investment in the capital’s economy, as well as improving its energy productivity and competitiveness.

In 2011 London set itself the challenge in its Climate Change and Energy Strategy of reducing carbon dioxide emissions by retrofitting 2.9 million homes and 11 million square metres of floor space in public buildings, plus 44 million sq m of private sector workplaces by 2025.

Much has been done, but not enough.

Since 2005 almost 1.5 million works have been undertaken to improve the energy performance of homes in London with 350,000 lofts insulated and 257,000 cavity walls insulated and 803,000 efficient boilers installed. Some of this has been under the Greater London Authority’s RE:NEW programme, which has been operating since 2009.

There are still 650,000 cavity walls that are unfilled and 674,000 lofts that could be made cosier.

Barriers to retrofit

There are many barriers to this further work. Amongst these, Sadhbh Ní Hógáin, housing retrofit project manager at Haringey Council, cites:

• the ambiguity of whether you need planning permission for external wall insulation
• inconsistent energy policy from government
• communicating the benefits of solid wall insulation and energy efficiency especially in the private rented sector
• ensuring high standards of installation quality
• the challenge of delivering carbon saving projects during a period of financial austerity.

Another problem is that many premises were built long before good insulation standards were required, in both the commercial and residential sectors.

The state of London’s building stock is becoming an issue for its new mayor, as the 2011 Climate Change and Energy Strategy requires Sadiq Khan to ensure retrofits are carried out on around two-thirds of London’s current non-domestic buildings over the next decade.

Nevertheless the ACE report claims London is falling well behind on its milestones to 2025 and says that the mayor also has his own targets to deliver – when he was elected this year his manifesto promised to make the capital zero carbon by 2050.

“The mayor has set ambitious climate change and energy targets,” Mr Guertler said. “But we are falling well behind on our milestones to reach them. We are improving homes at half the speed we need to – and public sector buildings aside, nobody at City Hall knows what progress is being made to improve our workplaces.”

There has been some success in the hospital sector. Global Action Plan runs an award-winning behaviour change program called Operation TLC, which helps staff take action to improve conditions in buildings used for healthcare. It has been implemented in six NHS trusts across the UK, half of which were in London, and works by harnessing the positive efforts of staff to give patients the best possible care. So far it has succeeded in reducing NHS electricity bills by over £500,000 a year, out of a total bill of £70 million across the UK.

Also, London’s RE:FIT programme has underpinned £93 million in improving public sector buildings. But besides this, there is little policy in place to address the energy efficiency of non-residential properties.

The policy gap

Legislation is coming into force designed to improve the energy efficiency standards in privately rented buildings. This legislation, called Minimum energy efficiency standards (MEES), will make it unlawful for landlords to grant a new lease for properties that have an EPC rating below E from 1 April 2018.

Apart from this, at present the UK has little in the way of a national policy in place to promote energy efficiency. With the failure of the Green Deal, action to tackle fuel poverty has fallen dramatically since 2012, as this graph shows:

 Action to address fuel policy has decreased dramatically.

ACE itself has been campaigning for energy efficiency in buildings for decades. It is now asking the new government for seven key policies to be enacted:

• A new energy policy framework
• Buildings energy efficiency as infrastructure
• A leadership role for the public sector
• Zero carbon new builds
• Minimum energy efficiency standards for existing buildings
• Incentives for energy efficiency retrofits
• Improved access to finance for energy efficiency investments

The government is currently consulting on how to fill the policy gap with respondents having two weeks left to respond. Its only idea is to continue the policy of forcing energy suppliers to upgrade the least energy-efficient homes. But this approach alone doesn’t address the breadth or severity of the problem.

Furthermore, now that the Department of Energy and Climate Change, which instigated the consultation, has been abolished by the new prime minister Theresa May, it is unclear who will even be responsible for driving this policy forward.

For London, at least, Sadiq Khan will have to go it alone.

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David Thorpe is the author of:

• Best Practices and Case Studies for Industrial Energy Efficiency Improvement (with Oung, K. and Fawkes, S. UNEP, 2016)
• A London Conversation: Business Briefing on Green Bonds (The Fifth Estate, 2015)
• The One Planet Life (Introduction: Jane Davidson. Routledge, 2015)
• Earthscan Expert Guide to Energy Management in Buildings (Earthscan, 2013)
• Earthscan Expert Guide to Energy Management in Industry (Earthscan, 2013)
• Earthscan Expert Guide to Solar Technology (Earthscan, 2011)
• Earthscan Expert Guide to Sustainable Home Refurbishment (Earthscan, 2010)

Why PPP cannot solve the affordable housing problem

It is now well established that, in an age where increasingly more people live in cities than in rural areas, squeezing in a higher population per square mile is preferable to urban sprawl for a number of reasons. This principle is highlighted by the second of a series of new reports from the Urban Land Institute (ULI) and TH Real Estate that was launched last week in London and San Francisco.

The Density Dividend: Solutions for Growing and Shrinking Cities takes a look at six European cities (Birmingham, Dresden, Istanbul, London, Stockholm and Warsaw) that are at various stages of population change – growth and decline – and concludes that they have little choice but to densify or face being increasingly inflexible, unattractive to live in, unsustainable, and ultimately uncompetitive.

It tries to establish what does and doesn’t work in making densification successful and popular.

But are the solutions the report offers sufficient to ensure success?

Cities vary in their attitudes. Some are new to urban redevelopment or lack the tools to deliver density in an integrated way, relying instead on ad-hoc initiatives and innovation.

The report identifies three distinct elements that need to be in place to ensure synchronised, sustained progress towards better, higher density:

1.  A strong story and vision for future evolution that can galvanise attention and support from residents, workers and investors alike together with a robust growth plan that provides a guiding framework within which development can proceed.
2. A prioritised tactical plan about where and how to densify, targeting areas for a critical mass of redevelopment matched to durable systems of investment and improved legal, land-use, and asset management tools.
3. Foster a demand for new urban space and focus on the positive psychology of vibrant urban lifestyles and locations.

The report comes from the Urban Land Institute (ULI), whose 34,000 members represent all aspects of land use and development disciplines, and TH Real Estate, an investment management company specialising in real estate equity and debt investing worldwide, owned by TIAA-CREF, a US financial services company. Once you realise that it has assets of around £557bn you begin to realise where this report is coming from.

The report advocates public private partnerships (PPP) as a way of solving investment problems. These kind of partnerships are favoured by both sides (developers / investors, and local authorities) because they appear to be a way of sharing the investment burden of creating new housing, particularly affordable housing, the need for which is desperate in most cities.

But is this true?

The experience of London

The picture that the report paints of London, however, is at variance with the reality. It is not a London which I recognise. Since I know this city better than the others, a comparison of the painted picture with what I know serves as a way of evaluating the authoritativeness of this report as a whole.

Of London, the report commends The London Plan which it says:

"has allowed London to be strategic about its re-urbanisation over the past 15 years. It supports compact city development and rules out sprawl as a means of accommodating the extra 300-400,000 homes and 500,000+ jobs forecast as needed by 2030. The plan is distinctive for identifying over 40 ‘opportunity areas’ for mixed-use intensification, mainly brownfield sites around transport interchanges. It also provides an overarching vision which allows large-scale projects such as Crossrail and the Olympics to be organised and delivered with confidence."

Some of this is true. Research from around the world about livability and sustainability in cities stresses the importance of development around public transport hubs and of making maximum use of existing brownfield sites. Wherever public transport hubs are sited, whether they are bus rapid transit, Metro or rail, real estate values go up, an increase in density occurs, and so does the level of economic activity and satisfaction of inhabitants.

Crossrail is an incredible achievement, one of the most impressive contemporary engineering projects in the world, and it will be vital to target density can improvements around the new stations. Istanbul is an example of a city that has increased population density without planning and without improvements in transport infrastructure with disastrous results.

But improvements do need to be made with regard to the needs of local people. They must be brought on side and listened to, which did not happen in the case of the Olympics site in London 2012. As the focus was on the timescale and the need to create a world-class sporting destination, local needs were bulldozed out of the way.

Everything depends for its success in urban development on the provision of housing that satisfies real needs. This is true no matter where you are in the world.

Part of the London Plan is The London Housing Strategy, which has an aim of delivering over 42,000 new homes a year in the city by creating a ‘Housing Bank'. This is supposed to help subsidise rent for households looking to buy their home, give bespoke financial support to speed up house-building on public land, and offer low-cost loans for developers and housing associations.

This is cited in the report as an example of a successful approach.

But is it?

First of all, the Bank doesn't even attempt to meet the actual needs for London's additional housebuilding, estimates of which fall within a range of 50,000-80,000 per year. New homes are in fact well below this level; in 2012-13 there were 21,900. Reports in January suggested that the Bank is likely to miss its target to create 3,000 homes, as documents show developers are planning to build just 106 properties by the 2018 deadline. Its website today talks of support for just 643 homes.

Graduates, young professionals, essential workers in service sectors like health, i.e., the very people that cities need to attract to be competitive and successful, are being priced out of London by the housing market. This is overheated due to a combination of lack of supply and investors from overseas buying up houses which then sit empty. Since 2002, London’s population has increased by 14 per cent, yet housing stock has only increased by 9 per cent during the same period.

The city’s average house price was £450,000 in December 2013, 73% higher than the national average and up 12% in the last year.

According to housing charity Shelter, the four main barriers to housing development in London are the same as for the rest of the country, but made worse by London’s tight administrative boundaries, status as an international property market and lack of fully devolved powers, including those over taxes.

The development market in London has become concentrated into too few firms, and the hurdles to involvement are too high. The price of land is also too high.

The Mayor’s London Housing Strategy itself states that delivering 42,000 per year will be ‘a huge challenge in itself.’

So is PPP the answer to this problem?

In 1980-81 local authorities were responsible for 70% of housing completions in London. Then Margaret Thatcher declared war on local authorities in England and introduced the Right to Buy for council tenants, stopping local councils from reinvesting the proceeds from the sale of their housing stock to tenants in building new homes. So in 2014-15 the equivalent figure was 2%.

Post 1980, new home building in the British capital reached a peak of 24,060 in 2004-05, in comparison to the lowest figures of 10,960 in 1984-85 (data from the Department of Communities and Local Government (DCLG)). So even the 2004-05 peak is less than half of the more conservative estimates for the need for new homes.

In other words, it was better when councils were allowed greater control of their finances and able to build council homes themselves.

Many of these homes must be affordable, although there is some debate over what this actually means. Nevertheless, according to one definition in 2013-14, just 9,200 affordable new homes were provided in London. 88% of these were new build, and comprised 45% of all new dwellings. The rest were provided by acquisition of existing stock.  This shows just how far behind the need the situation is and why homelessness is such a big problem.

The Housing Bank, to be fair, is meant to solve these problems. Some social housing associations like the Peabody Trust are taking advantage of it. But it is not up to the scale of the challenge.

Jamie Ratcliff, assistant director for programme, policy and services at the Greater London Authority, says the Housing Bank is offering deals at an initial one per cent, "approximately a third of the recent historic record low rate achieved by The Housing Finance Corporation/Affordable Housing Finance with their Government-guaranteed bond". He adds: "There are projects in parts of London where the costs, including decants, leaseholder buybacks and demolition, exceed projected sales values. This at best delays and at worst prevents the development of homes for sale or shared ownership."

The point of accessing funding from the London Housing Bank is to help "cash flow the development, allowing viable homes to be built now and sold in later years, once values have adjusted, ensuring the building of homes now, not vacant sites", he adds.

Yet finance is only one part of the obstacle course facing anyone wanting to tackle this problem. The lid is taken off this by a House of Commons briefing paper published a month ago called "Meeting London’s housing need", which cites many of these barriers.

At the institutional level there are staff and resource shortages in the planning departments, a lack of institutional memory within local authorities and limited partnership working between the many boroughs which make up London. From the point of view of developers there are uncertainty in the planning system, dysfunctional viability procedures, difficulties in land assembly and complex land ownership. The briefing note also acknowledges high land values, density being too low, and land supply constraints.

The solutions suggested include a more strategic outlook across boroughs, redefining the role of the Greater London Authority, modifying compulsory purchase order powers and procedures and introducing more consistent targets for affordable housing. Support also needs to be given to builders and developers to bring more players into the market.

Going back to the Urban Land Institute (ULI) report, it makes little reference to the complexity that is seen on the ground in this type of situation. One of its conclusions is:


"Cities that build an idea and ambition about what they want to become, and which instil this aspiration in their citizens, find it much easier to achieve the behaviour change that is necessary to increase densities of interaction and development."

But the experience of London shows it's not the citizens whose behaviour needs changing.  The required changes are institutional.

Large house builders like Persimmon and The Berkeley Group are reported as giving their executives record bonuses despite building fewer homes: Berkeley bosses will pocket £42m this year and up to £500m in the next five years, while Persimmon boss Jeff Fairburn could get £100m by 2021 according to Sunday's Observer magazine – are they members of the ULI, I wonder? Something clearly needs to change.

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David Thorpe is the author of:

• The One Planet Life;
• Energy Management in Buildings;
• Energy Management in Industry;
• Solar Technology;
• Sustainable Home Refurbishment;
• Sustainable Transport Fuels;
• Solar Photovoltaics Business Briefing;
• Passive Solar Architecture Reference Book (due in 2015);
• Solar Energy Reference Book (due in 2015).