OPINION: REGULATIONS


FORWARD GUIDANCE?


The Governor of the Bank of England has been providing clarity over the future of monetary policy. Hywel Davies argues for more forward guidance on regulations affecting buildings


Since becoming Governor of the Bank of England, Mark Carney


has sought to provide clarity to financial markets about the future direction of monetary policy, primarily through his ‘forward guidance’. The argument for this is that uncertainty increases market risk and costs. The construction and property


sectors face significant policy developments over the next seven years, accompanied by considerable


policy uncertainty, even ignorance. The 2013 Building Regulations come into force on 6 April. Government says it is


committed to zero carbon homes from 2016. But the transitional arrangements will allow developers to continue building to the 2010 Regulations well into 2015. We also have the ongoing Housing Standards Review. The Prime Minister told the Federation of Small Businesses that the government intends to ‘help housebuilders by cutting down 100 overlapping and confusing standards


applied to new homes to less than 10 – these reforms are estimated to save £60m per year for home builders, equivalent to about £500 for every new home built’. What this means for Regulations is


not just uncertain, but totally opaque. Communities Secretary Eric Pickles has already consulted on ‘winding down’ the Code for Sustainable Homes, as well as doing away with ‘secured by design’ and ‘lifetime homes’. And Mr Pickles wants to stop planning bodies setting local technical standards above the minimum for health, safety and energy conservation in Building Regulations. These proposals are believed to


have received 750 responses. The Environmental Audit Committee called on Mr Pickles not to ‘demolish the Code’. While large parts of the Code have been overtaken by Building Regulations – notably for energy –


28 CIBSE Journal March 2014


others have not. And the only reason why Regulations have overtaken those aspects of the Code is because the Code drove innovation around those aspects, so it is now possible to add them to Part L without burdening housebuilders! And what about the impact of dropping ‘secured by design’ on insurance premiums? How much of the £500 saved by developers will be passed on to buyers, and how much will then go on increased insurance premiums? It is also unclear how these proposals affect local rules relating to flood protection. Will these be outlawed? Given the current problems in England, that seems unwise. But the upshot of all this is great uncertainty about the future shape of Building Regulations.


EU View As well as our zero carbon policy, we have the EU policy on ‘nearly zero energy’ buildings, which are required from 2020 (2018 in the public sector). This relates not just to new buildings, but also to ‘major refurbishment’. We do not know how the UK will define ‘nearly zero energy’, nor whether it is the same as zero carbon. Article 5 of the 2012 Energy Efficiency Directive requires that 3% of public buildings


be renovated each year from 1 January 2014. It is unclear how this is being done.


Article 8 of the Directive requires


large enterprises to undertake an energy audit of their buildings, transport and processes every four years. In the UK this is called the ‘Energy Savings Opportunity Scheme’ (ESOS), and not only requires large enterprises to assess the energy they use, but to consider how to improve their energy performance, including that of their buildings. We have been consulted on


ESOS, and are awaiting regulations, guidance and scheme rules, which we anticipate in May. This will show how ESOS sits alongside reporting


What this actually means for the Regulations is not just uncertain, but totally opaque


requirements under the Carbon Reduction Commitment, Greenhouse Gas reporting, and existing energy certification rules.


Minimum Energy Performance Standards The 2011 Energy Act requires regulations to introduce Minimum Energy Performance Standards (MEPS) for homes from April 2016, and from April 2018 for non-domestic buildings. These are expected to apply to the sale or rent of buildings having an F or G-rated EPC. It is proposed that such buildings will have to be brought up to an E Rating before being sold or let. This obviously has a potential impact on the value of properties. Expect a consultation soon. All this adds up to major uncertainty:


no clarity over the direction of Building Regulations, no indication of what ‘nearly zero energy’ might mean, and limited visibility of MEPS. Will there be changes to Building Regulations in 2016 for zero carbon homes? Or will that be pushed back to 2019, nearer to the EU requirement for ‘nearly zero carbon’ from 2020? And far too few people are aware of ESOS and what it might mean for the large enterprises it affects. The Bank of England’s Forward


Guidance aims to provide a degree of certainty about the UK monetary policy framework for the foreseeable future. Given the role of non-domestic property in the investment portfolios of most major asset management and pension funds, the argument for some degree of certainty over the regulations relating to the construction, refurbishment and ongoing commercial value of the property in those portfolios is just as pressing. The financial sector needs this certainty just as much as the construction and property sectors.


l HYWEL DAVIES is technical director at CIBSE www.cibse.org


www.cibsejournal.com


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