Wednesday 13 November 2019

Why higher standards do not mean home price inflation

Jeff Colley

Making world-class sustainable building standards mandatory doesn't mean higher costs. Developers, builders and consumers have nothing to fear and everything to gain from Dun Laoghaire Rathdown County Council's commendable decision that all new buildings in the county must meet the passive house standard.

Passive houses can be delivered at remarkably low prices. One Wexford-based developer is offering A2 rated certified passive houses - 3-bed semi-ds of over 1,100 sq ft each - for €170,000 each. Guaranteed heating and hot water bills come to just €200 per annum.

Passive house isn't about extravagant tech - it's about simple energy efficient measures to ensure comfort and health. It saves money by designing out the need for substantial heating systems, and by encouraging more compact designs and therefore reducing needless material spend.

And it delivers a better building in the end - it's tried and tested, unlike many of the poorly conceived approaches the industry is attempting to meet new building regulations.

Our banks would therefore do well to follow the example of German and English lenders like KFW & Ecology which offer mortgage interest rate reductions of up to 1.25pc on passive houses due to their low default risk and long term resale value.

Passive house will add little or nothing to construction costs because Part L of the building regulations already demands 60pc energy savings and mandatory renewable energy systems, which typically means an A2 or A3 Building Energy Rating.

The difference is that passive house is proven, whereas lots of Part L compliance approaches are not. It's absurd that hole-in-the-wall ventilation is permitted in Part L compliant buildings, in spite of the fact that the evidence shows it doesn't work.

Even if passive house and Part L compliance result in cost increases, that doesn't mean higher development costs. As former Society of Chartered Surveyors president Tom Dunne has argued, there is no inherent link between higher energy standards and house price increases.

The market determines what price it's prepared to pay for property. If construction costs increase then land costs fall accordingly. Developers work out how much they expect to sell the properties for, deduct their margin, the aggregated fees, levies and construction costs, and bid what's left on the land.

If the developer already owned the land, they have no excuse for failing to factor in increasing construction costs, particularly as zero carbon homes were expected to be standard by 2013.

High land prices are a bad thing for virtually everyone except the landowner. But if land prices fall to absorb the cost of building passive houses, that means more skilled construction jobs for no extra capital cost, and genuinely future-proofed buildings insulated against energy price shocks for their entire lifespan.

Jeff Colley is editor of 'Passive House Plus'.

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