Zero-sum games

The government is keen to engage the support of the construction industry to achieve its goal of zero carbon emissions for all new homes within a decade. It is so keen, in fact, that it is prepared to forgo part of the stamp duty land tax that buyers would otherwise have to pay.

The idea is that the purchaser pays less in stamp duty, but (possibly) a higher price for their zero-carbon home to reflect increased construction costs. This in turn means developers can commit themselves to constructing zero-carbon homes, knowing that at least some of the extra cost involved will not deter potential buyers.

The big question is whether the figures stack up. It all starts with the government, which has committed the UK to a target of reducing UK carbon emissions by 60% by 2050. Even the cows are having to do their bit by eating garlic, which apparently reduces their emissions; but the elimination of carbon emissions from the running of homes must also make its contribution.

The government has focused on making new housing highly energy efficient, which is where construction comes in. There is no point building a new home with a gas supply and then expecting to satisfy the zero-carbon test. Purchasers will be relying on developers to enable them to take advantage of the tax concession.

The government defines a zero-carbon home as one that meets three strict criteria:

• Heat loss must be minimal (0.8W/m2K)
• Carbon dioxide emissions must be zero – that is, all energy consumed by the property must come from renewable sources
• Household appliances must be powered solely by the energy produced by the property.

First, the Standard Assessment Procedure (SAP) worksheet will be used to measure heat loss, emission rates and energy consumption. The worksheet will be used by an energy assessor to determine whether the home is zero carbon. If it is, a certificate will be issued.

The SAP will be revised shortly to bring it up to date with recent developments in power generation.

Eco-groups have welcomed this measure, although the property industry itself is more sceptical

Second, renewable sources excludes energy derived from fossil fuels and nuclear power.

So a zero-carbon home cannot have a gas supply and all electricity must come from renewable sources.

The third criterion, that appliances must be powered solely by the energy produced by the property, is complex.

Clearly, the quantity and range of appliances differ from home to home. Draft regulations set out a formula for calculating an appliance quota, based on the floor area of the property. Where the energy produced, or saved, by a dwelling exceeds that required for heating and lighting, the surplus can be set against the appliance quota and averaged over the year. It is not clear yet whether extra power for appliances will be permitted from sources outside the home, such as local heating and power schemes.

If the sale price of a zero-carbon home is £500,000 or less, no stamp duty will be payable. If the sale price exceeds £500,000, there will be a flat £15,000 reduction in the duty. The relief applies only to the first sale of a newly built property, so subsequent sales will not benefit. The exemption will apply initially for five years only, up to 1 October 2012.

Environmental groups have welcomed this measure as an important step in combating climate change, although the property industry itself is more sceptical. New build accounts for less than 1% of the UK housing stock and older homes are generally much more energy inefficient than new properties. They will remain outside the scope of these regulations, as will commercial properties.

Now for the figures: in order to be effective, the amount of the stamp duty relief must be related quite closely to the extra cost of constructing the new home to accommodate the zero-carbon requirements. It remains to be seen whether the cost of buying a new zero-carbon home is greater than purchasers are willing to pay, even with the stamp duty relief.