But housing minister John Healey reveals that new energy rules could cost the industry £7bn

Developers will need to spend an extra £11,000, rather than the £22,000 that had been mooted, on making a new semi-detached house carbon neutral under the long-awaited definition of zero-carbon unveiled by the government last week.

Cyril Sweett had estimated that a home would cost between £18,350 and £21,750 more, going by the original definition of zero-carbon in the Code for Sustainable Homes.

John Healey, the housing minister, announced the news on Friday. He also revealed that developers would be expected to mitigate 70% of regulated emissions on site – that is, those included arising from space and water heating, fixed lighting and ventilation – through energy efficiency improvements and on-site energy generation.

A government assessment published on the same day revealed that the overall cost to the construction industry of these moves could run to £7bn.

The remaining 30% of regulated emissions, and all those from appliances and cooking, would have to be dealt with using a choice of six “allowable solutions,” including further carbon reductions on site, energy efficient appliances and investment in low and zero-carbon heat infrastructure, such as combined heat and power plants.

Adam Mactavish, director of consulting at Cyril Sweett, said offsetting the required emissions using “allowable solutions” would cost about £2,220 per home.

The government has deferred a decision on the energy efficiency of the fabric of zero-carbon homes until the end of the year.

Imtiaz Farookhi, chief executive of warranty provider the NHBC, said: “Many in the industry will find the 70% increase in energy performance challenging.”

Healey also announced a series of other measures, including the establishment of a new taskforce to look more closely at the minimum energy efficiency of new homes, and said the cost of tackling climate change should be prioritised above other demands on land value.

Demands on developers

John Slaughter on climate change policy

John Slaughter
John Slaughter

John Healey’s statement marked the first time the government had talked about how specific policy objectives affect land values and the contributions developers are expected to make to them.

He seemed to be saying climate change should be the top priority. If so, contributions developers make for affordable housing, infrastructure and space standards would have to be scaled back. Even before the credit crunch we were concerned about the level of contributions the government and local authorities were demanding and the cumulative impact on developers. Post-crunch, there is debate about just what land value can be expected to support.

We welcome this announcement as part of a wider debate about how to deliver housing, but need to discuss how it will work in practice. If there’s no value in land, homes won’t get built. We trust the pre-Budget report will expand on this in greater detail.

John Slaughter, director of external affairs, the Home Builders Federation

Also announced...

  • A feed-in tariff to pay consumers between 31p and 36p per kWh to produce electricity with solar photovoltaics or wind turbines and feed it into the grid
  • A shortlist of schemes for the Severn Tidal Power project, including the Cardiff-Weston barrage and two lagoons
  • £10m investment to make the South-west a world centre for wave and tidal energy
  • £21m for the Low Carbon Community Heating Initiative fund.