CULS ARTICLES
Do new eco-homes achieve a premium (and how
much more do they cost)? Net zero requirements for new homes
Developers need to account for the additional cost without necessarily getting it back through the selling price. And landowners, promoters and developers need to be aware of the extra costs in order to secure sufficient grid capacity needed to deliver sites with more electricity hungry homes.
Even today, higher standards are being implemented through local authority planning policies so that new homes are net zero carbon (in operation). Practically this means that rooftop photovoltaic panels are likely to be needed to balance energy consumption and generation, and therefore meet net zero carbon targets. Even where it is not yet required, some builders are choosing to build to higher energy-efficiency standards ahead of the deadline. This is shown in the proportion of homes with an EPC rating of A and the proportion of new homes with electric heating. Both of these measures have more than doubled in GB in the last five years with 6% of new homes in the last year rated EPC-A and 28% of new homes completed in Q1 2023 in England and Wales having electric heating. Increase in new homes with EPC A-rating in the last decade 7.0% 7.0% 6.0% 6.0% 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0%
Mar-11 Mar-11 Sep-11 Sep-11 Mar-12 Mar-12 Sep-12 Sep-12 Mar-13 Mar-13 Sep-13 Sep-13 Mar-14 Mar-14 Sep-14 Sep-14 Mar-15 Mar-15 Sep-15 Sep-15 Mar-16 Mar-16 Sep-16 Sep-16 Mar-17 Mar-17 Sep-17 Sep-17 Mar-18 Mar-18 Sep-18 Sep-18 Mar-19 Mar-19 Sep-19 Sep-19 Mar-20 Mar-20 Sep-20 Sep-20 Mar-21 Mar-21 Sep-21 Sep-21 Mar-22 Mar-22 Sep-22 Sep-22 Mar-23 Mar-23
W
ith changing building standards on the horizon, we are regularly asked the question of whether new eco-homes achieve a premium and how much more they cost to build. The answer has an impact on how much developers pay for land or have to accommodate in their margins. In this latest analysis we find that there is typically no premium for smaller homes, and a premium of 12% above similar standard new build for larger homes. However, the homes cost more to build – sources estimate that an additional 4-8% is needed to meet the Future Homes Standard or an additional 10-14% to build to net zero in operation (assuming the national grid is decarbonised).
New EPC EPC A-rated A-rated homes homes as as aa New proportion of of all all new new homes homes in in proportion England and and Wales Wales (rolling (rolling 12 12 England month average) average) month
Lucy Greenwood MSci MA (Cantab) PhD Director Residential Research and Consultancy New Hall, 2005
In the drive toward net zero, from 2025 all new homes in England will need to be built to the Future Homes Standard. This requires new build homes to emit 75-80% less carbon than homes built to 2013 standards, meaning that they need to be futureproofed with low carbon heating and high levels of energy efficiency. In practical terms there is no defined means of achieving this standard, as the Government is keen to encourage industry innovation in developing new solutions, but is likely to include thicker walls and triple glazed windows for greater insulation (lower U-values), as well as heat pumps instead of gas boilers, and ventilation systems with heat recovery. Alternative low carbon, non-fossil fuel heating systems could include infrared, geothermal and hydrogen, with district heating systems more suitable in some locations and home types.
Source: DLUHC
New homes homes with with electricity electricity as as the the New main fuel fuel source source as as aa proportion proportion of of main all new new homes homes with with EPC EPC certificate certificate all in GB GB in
Increase in electric heating as the main fuel type in new homes 30% 30% 25% 25%
0-12% premium for more efficient new homes
4-8% additional cost to meet FHS
20% 20% 15% 15% 10% 10%
10-14% additional cost to meet net zero home
46
CAMBRIDGE UNIVERSITY LAND SOCIETY 2023
5% 5% 0% 0%
Source: DLUHC
2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 Q1 Q1 2023 2023