MIPIM is now well underway, and we are looking at some of the themes the conference is focusing on this year. We started with the office resurgence theme, and now we are looking at Green is the new Black. This will focus on ESG and what the industry is doing to meet its sustainability targets, particularly looking at housebuilders as they begin to put sustainability at the forefront of their agenda. With this in mind, we look at what we can expect in the next decade in sustainable housing.
Over the past three years, the UK Government has focused on implementing new regulations as part of its strategy to make greenhouse gas emissions reach net zero by 2050. The UK housing market is playing a large part in the roll out of this strategy with all new buildings needing to fulfil this commitment. The developments will have a large impact on housebuilders’ plans and progress and bring an array of challenges, so developers will need to be aware of what to expect in the next decade to ensure they are prepared for a new way of building. In our 2021 report, ‘Building and Buying Better Homes’, we surveyed over 300 housebuilders and 2,000 plus homebuyers to understand the different perspectives on sustainable housing, as well as predict the changes likely to occur in the UK housing market over the next few years.
Targeting behavioural change among consumers
Our research showed that consumers have a growing appetite for greener homes, with sustainability sitting in the top six priorities for buyers. With green homes coming at a cost, one in ten buyers said they would not pay more for a sustainable home so, although a priority, as you’d expect cost is still a material factor for consumers.
As a result, we could expect to see measures and regulations that target behavioural change among consumers that allow buyers to make sustainability a priority without increasing their budgets. During the COVID-19 crisis, stamp duty was used as an economic stimulus for home owners, so it is likely that we could see a similar type of rebate being used as a green incentive.
Although developers are currently aware of the opportunities of green funding, banks are not seeing a significant uptake in green loans. With green finance providing significant benefits for both the lender and developer, our research suggests this type of finance will become the norm with green covenants in loan agreements becoming standard.
Similar to potential consumer incentives, we could also see a rise in incentives for developers, as it becomes easier for those looking at sustainable development to raise finance.
Post-pandemic changes and smart homes
Since the COVID-19 pandemic there has been a clear shift in priorities for buyers. There is a bigger need for open spaces and places to walk – our research showed that 43% of buyers were looking for this amenity and 69% wanted a garden, a much higher percentage than in 2019.
With the role of the home also changing to accommodate an increase in working from home, buyers are looking for a home with dedicated space to work, as well as live, on a more permanent basis. Developers have tasked themselves with designing a home that focuses on the quality of internal and external spaces to accommodate the ‘new normal’ and incorporating work hubs into housing developments.
All stakeholders have to consider sustainability in every stage of the building lifecycle. Planning authorities are increasingly imposing more and more onerous sustainability and biodiversity requirements on determining application.
In line with the Environmental Act 2021, all planning applications will need to demonstrate how a development will enhance biodiversity and protect the habitats around it. The Environment Bill, which received Royal Assent in November 2021, enforces the new Biodiversity Net Gain condition, which aims to create a minimum of 10% gain in biodiversity in developments. This could pave the way for stricter regulations aiming to protect biodiversity, making it more difficult for developments not considering sustainability to receive planning permission.
Decarbonising the home
There will be a greater emphasis on decarbonising the home as the Government continues to push towards the net zero target by 2050. Developers will need to be aware of the Government’s plans to slowly increase the minimum EPC ratings for both commercial and domestic property, which will significantly affect building plans over the next decade.
It was recently announced that all new homes in England will be required by law to have electric vehicle charging points installed from 2022, making the UK the first country in the world to make EV car chargers’ installation mandatory for new buildings.
In an effort to decarbonise heating, which accounts for nearly a quarter of UK emissions, the Government published its heat and building strategy in October 2021. As a result, we expect to see a widespread use of hydrogen gas in heating systems, in 2026.
Supply and demand of sustainable materials
Our research suggests a likely shift in the market dynamic for the supply and demand of sustainable materials as housebuilders bring more niche features to the mainstream. This will inevitably reduce prices and increase the availability of sustainable materials.
With more regulations for sustainability in play for the construction industry to ensure that the UK is building ‘greener’, construction plant equipment is likely to be under more scrutiny. Developers and construction workers need to consider more environmentally-friendly products to reduce carbon emissions. The market expects this will increase the demand for electric plant equipment, which is already growing at a pace.
Preparing for the future
For a full overview of how sustainability is affecting the housebuilding sector, download our report, ‘Building and Buying Better Homes’, for perspectives from housebuilders and home buyers, to equip you with the knowledge to tackle the challenges ahead.
About the author(s)
Daniel is a partner in Gowling WLG's Real Estate team. Daniel has a wide experience acting on all aspects of residential development across the various asset classes.