Improving the energy efficiency of a building may be good for the planet, but occupiers may only be prepared to foot the bill if they can directly feel the benefit. Gareth Roberts of Sturgis Carbon Profiling analyses the latest research

Research shows that occupiers prefer Victorian and Georgian homes, but they can provide poor energy efficiency

Research shows that occupiers prefer Victorian and Georgian homes, but they can provide poor energy efficiency

01 / Introduction

People spend over 90% of their time in buildings, which can have direct impacts on their wellbeing. There is no single definition of “wellbeing”, but it can include avoidance of physical illness - such as those caused by volatile organic compounds (VOC) - and indirect impacts, such as the effect of day lighting levels on mood and performance. The physiological parameters have been studied in much detail and form part of the international and national standards and guidelines for built environment.

This article sets out the case for integrating wellbeing standards in conjunction with whole-life carbon measurement and reporting on projects. Recent research by Sturgis Carbon Profiling (SCP) shows that a rental uplift of 2.7% can be achieved when persuing both these objectives at the same time.

Over recent years, justifying additional expenditure on energy saving and carbon reductions in speculative development schemes has been challenging, given the weak evidence for the financial value that can be generated. We began by investigating relationships between health, wellbeing and carbon, as occupiers may be more prepared to invest in health and comfort than the lofty ideal of reducing their carbon footprint.

To investigate these issues, we examined a wide range of industry reports available and integrated transactional data gathered working for a range of clients on live projects in central London.

Some of these projects were ultra-low energy EnerPHit standard retrofits, where it was established that the potential tenants are motivated more by the healthy environment provided by newly refurbished homes, than carbon reductions and reduced energy bills.

Some of the substantial benefits that a space with improved wellbeing-orientated design are:

  • Healthy sleeping cycles
  • Lower carbon dioxide concentration, resulting in higher cognitive performance
  • Less dust, pollen and VOCs, reducing asthma attacks and allergy triggers
  • Feeling secure and comfortable, reducing stress
  • Sense of personal contribution to environment
  • Natural lighting reducing eye strain and headaches.

We have developed 12 categories to look for evidence of rental gains which will be outlined in the following sections.

02 / Wellbeing variables

  • Indoor air quality

Air quality is an important factor for a healthy living environment. High levels of air pollution can adversely affect lung function and trigger asthma, and even cause cancer and cardiovascular events. People living in areas of big cities with a large amount of traffic, especially children and elderly, are at particular risk.

There is no air quality standard in the UK for residential buildings. The prescriptive provision includes extraction ventilation rates for kitchen and bathrooms (usually by mechanical means) and controllable ventilation supply (via trickle vents). These measures often act against the government’s intention for reduction in air permeability in buildings, as they result in uncontrolled heating loss through gaps in the building fabric. As a result, either the heating demand or the air quality are compromised in refurbished buildings.

  • Thermal comfort

Comfortable temperature range in dwellings is often considered to be 19-25°C (as defined by BS EN ISO 7730). However, the perceived comfort varies depending on the activity level, clothing, air speed, radiation temperature, individual preferences and even the psychosomatic effect of the weather.

Another consideration is overheating in the summer months, which is becoming more of a real and present risk to London in particular, which has experienced two major heat waves in the last decade (2003 and 2006). The reason for this vulnerability is that London is one of the warmest parts of the UK and, therefore, thermally poor homes are more likely to overheat, which is likely to result in ill effects and even deaths in the more vulnerable. These risks can be mitigated by planning for the future: incorporating future active shading provision into the design, increasing the amount of green space and providing the flexibility for the installation of mechanical cooling.

  • Draughts and cold spots

Draughts are associated with temperature stratification due to cold surfaces and air infiltration through cracks in construction. They can give rise to colds, stiffness and muscular aches. As a response to this problem, radiators are positioned under windows, which helps with temperature stratification but wastes useful heating energy.

The reduction of draughts in buildings goes hand in hand with improvement to the air permeability and to the thermal performance of the building. For example, specifying good quality double or triple-glazed windows can eliminate draughts as the surface temperature stays above 15°C and the compressive seals prevent cold air infiltration. However, in practice, poor installation and inefficient slim-line glazing may result in condensation, which shortens the window’s life by causing rot of the timber frame.

  • Relative humidity

Relative humidity is a measure of the moisture content of the air. This is expressed in mass of water vapour per unit mass of dry air (%). It is usually associated with human activities at home, such as taking a shower or cooking, which results in spikes of relative humidity which otherwise closely follows external weather patterns.

People rarely perceive these spikes as being uncomfortable, as a human body has a relatively large comfort range of 25-60Pa recommended by ASHRAE Standard 62.1-2013. When humidity becomes noticeable is when we see its effect on our environment, for example condensation on windows or mould in a shower room that has poor extraction.

  • Acoustics

Noise affects people in different ways depending on its level and may cause annoyance, interference to speech intelligibility or hearing damage. The acoustic environment must be designed, as far as possible, to avoid such detrimental effects.

For example, the sound pressure level of a busy high street is approximately 80-90dB. Single glazing reduces this noise level by approximately 10dB, which is equivalent to a continuous hum emitted by a vacuum cleaner 1m away. This can be reduced by using good quality double or triple-glazing and secondary glazing, which can reduce the noise level to a quiet room level of 30-40dB.

  • Natural and circadian lighting

Lighting in a building has three purposes: to enable the occupant to work and move about in safety; to enable tasks to be performed correctly and at an appropriate pace; and to create a pleasing appearance. A satisfactory visual environment can be achieved by electric lighting alone, but most people have a strong preference for some daylight.

BREEAM and the Code for Sustainable Homes both include some provision for appropriate day lighting levels for a workstation at home, otherwise natural lighting is rarely studied in the residential proposals. Where daylight is available, a good design will make use of it to save energy and enhance internal appearance without glare, distracting reflections, overheating or excessive heat loss. Where natural lighting needs supplementing, circadian lighting principles may be adopted where light intensity and wavelength may be varied throughout the day to mirror the natural environment outside.

  • Healthy materials

Studies from the Environmental Protection Agency on human exposure to air pollutants show that indoor levels of pollutants may be two to five times, sometimes more than 100 times, higher than outdoor levels. The air pollutants (such as VOCs, formaldehydes, nitrates, oxides of sulphur, ozone, carbon monoxide, asbestos and lead) mostly come from building materials, interior furnishing, cleaning products and personal care products. These cause health concerns, particularly asthma and lung complications.

Selecting healthy products goes hand in hand with reducing the carbon emissions of buildings. The most hazardous materials often have high-embodied carbon content while natural materials come from sustainable, recyclable sources. From our extensive experience of life cycle analysis of buildings, reducing the embodied carbon of materials can cut building emissions by as much as 30% over the life of the building, which is beyond the carbon savings achieved through operational energy reductions.

  • Aesthetics and flexibility

Interior design is an ambiguous and personal matter. It includes environmental psychology issues, layouts of furniture and relationships of spaces and functions, the harmony of colours, shapes, textures and combinations between these.

The emphasis should be placed on good quality, sustainable design. Robust details, natural healthy materials, flexibility and adaptability are especially important in privately rented homes as they improve the longevity of interiors and the satisfaction of building tenants.

  • Historic features and architectural integrity

The rental market in central London and most UK urban centres offers a choice generally between older homes in established neighbourhoods and newer houses by the volume builders. The RIBA and Ipsos MORI’s research for the recently released Future Homes Commission report found that people preferred Victorian and Georgian homes because they offer more space, light and flexibility.

The reality is that people like both old and new. We expect buildings to offer the proportion, adaptability and graciousness of a historic dwelling while offering the thermal comfort and fast reliable wireless streaming of the new generation of homes.

  • Financial savings

LSL Property Services confirmed that the number of tenants in “severe rent arrears” jumped by 4,000 to 94,000 in 2013 in the first three months of this year - marking the fourth highest figure on record - as people continue to struggle with ramped up rents and snowballing bills. At the same time, new research from the UK Green Building Council and WWF has found that “introducing minimum energy efficiency standards for privately rented properties will cost landlords less than £1,500 on average per home - far less than previous studies have shown - and will save tenants over £400 a year on energy bills”.

Moving all properties to band E will be a minimum requirement for private landlords from April 2018.

  • Sense of community and privacy

Sense of community has been defined as a feeling that members have of belonging. However, with the increase in mobility and communication technology, people often relate to each other outside of any physical boundary, and lack of privacy and control over one’s living space may damage social relations.

If landlords oversee the design aspects of individual buildings, they can be responsive to people’s needs for both privacy and social interaction. They also may encourage civic life, which has been identified as a core human need. For example, meaningful public participation in decision-making on urban environmental issues can be boosted by encouraging public consultations during the planning process.

  • Safety

Satisfaction with features of the local built environment has been found to play a major role in predicting perceived neighbourhood safety. Building owners often have limited scope to improve urban planning within the existing streetscape. However, there are a number of safety considerations that can be encouraged, for example, mixing housing tenants is likely to reduce crime by ensuring that informal surveillance and “safety in numbers” occurs. Other building specific measures may include implementing Official UK Police flagship initiative Secure by Design guidance on all projects.

03 / Aim and methodology

The objective of our research into wellbeing and carbon has been to identify and quantify the value of different variables, using transactional data and revealed behaviour. Analysis was undertaken using STATA and geographic information systems to undertake the econometric modelling of transactional data from different clients.

The crucial thing about using transactional data as a basis for analysis is that it does not rely on asking tenants what they think, but looks closely at what they choose to do and pay for, and this is subjected to statistical tests. Various statistical models were developed to test the data with the purpose of trying to discover patterns in the choices tenants make and then subjecting it to various hypothesis testing techniques to see if the results still held under different scenarios.

Data provided for this research has been made anonymous for this publication but all transactional data was baselined against Savills’ Prime Central London Residential Index to allow the analysis described in the results sections. In the Baseline Rent index - to the left - some of the alternative indices are shown. The Savill’s index is shown as the stepped orange line. The others shown were dismissed given their lack of either detail or data for the relevant sample periods.

The first model to be developed was a hedonic regression model, which compares the transactional value of the asset with different characteristics of the asset, which encompass a wide range of attributes, such as location, proximity to parks, transportation, setting, availability of shops or restaurants, EPC rating and tenant profile. The model estimated the magnitude and significance of each wellbeing attribute through the use of proxies. On the back of this first model various subsequent models were developed and tested to explore the first stage findings

Figure 1 – Baseline rent indices for central London

Click on the image above or here to see a large version >>


04 / Results

For many of the wellbeing attributes tested - such as air quality and healthy materials - there was no statistical evidence that their inclusion has any impact on rent or on carbon emissions. However, some did show relationships that are worth commenting on, including noise, carbon and heritage. It is also worth noting that these findings are part of an ongoing piece of work and that as more data is added accuracies will increase.

The relationships between the size of unit and the residual was initially examined; the residual being the difference between the actual rents achieved in a unit and the predicted rent based on “traditional” valuation parameters (such as location, area size, number of bedrooms and number of bathrooms). The residual is a very rough expression of “other attributes” including energy, wellbeing and carbon performance not controlled for. This was considered an important first step in the analysis because if some units were found to have a large residual, these units may be the ones worth examining more closely to see if they were also capitalising the wellbeing attributes we were seeking to identify the value of.

One trend that seems to be clear is that “other attributes” appear to have a greater influence on rents for larger and more valuable units. Having identified that “other attributes” have a significant impact on rents (as much as 80% on some units above 1,200ft2) the next challenge was then to try and unpick this grouping and identify the magnitude and significance of the individual attributes.

Figure 2 – Relationship between the size of a unit and the residual

The red and blue plots represent units that have positive wellbeing attributes, whereas the units with light and dark green plots have been identified as having negative attributes. This can help show that in some extreme circumstances for the same sized unit with the same physical features a difference in rent of over £30 per ft2 may be achieved.

Click on the image above or here to see a large version >>


To set about identifying the effects of each wellbeing attribute, individual unit rents were examined before and after a change in a wellbeing attribute on a given property, for instance, before and after secondary glazing was installed. This approach therefore allowed the controlling of the majority of the omitted variable bias between sample points in the initial analysis.

Many of the capitalisations for the attributes were negative, which suggests that people only seem to care about wellbeing parameters when there is bad performance and not when there’s good. Humidity is a good example, in that people only notice this and decide to pay less when they are aware of mould growth and otherwise rents were not greatly affected.

In the case of whole-life carbon performance and rents, a mixture of different effects were identified, which this research will aim as it goes forward to understand better. At this stage we suspect that occupiers may pay up to around 1% more for better performing units (in operational energy terms), however there is also a premium for exceptional performance in embodied or operational carbon terms through branded systems such as Passivhaus, which can give rise to an additional premium of 2% over that achieved through energy efficiency alone. This is shown by following the red line on Figure 4, which tracks the rolling average change in rents against carbon performance. The jump in value is identified around the 1,500KgCO2 e mark which points to the premium that exceptional green assets can achieve if they are endorsed with an external mark or certification such as Passivhaus.

Figure 3 – Change in rents in response to a change in a unit’s wellbeing attributes

Click on the image above or here to see a large version >>


05 / Conclusion

These finding are very much at an early stage of analysis but it appears that occupiers in central London are prepared to pay more for buildings that have a better quality of life associated with them and that framing the delivery of whole-life carbon reductions through this may help to communicate the benefits more effectively.

Below we have identified some of the general effects on rents:

  • Acoustic quality can generate small increase in rent but the effect is more pronounced when bad acoustics negatively impact on value.
  • Evidence suggests people will not pay more for homes with good humidity but if there are high levels and it causes problems with the fabric it can negatively impact on value.
  • The findings suggests that people value improvements to the heritage and appearance of their building more than improvements to its energy performance. This might suggest that the best way to undertake retrofit is to try to improve the fabric and carbon performance at the same time.
  • Energy consumption increases after retrofit. In some instances it was shown that demand for energy went up after retrofit in response to people seeking higher levels of comfort and wellbeing. This is an unintended consequence that is worth evaluating.
  • Thermal comforts and draughts: little evidence was found that headline rents would be influenced by this, however, tenant retention rates were found to be higher in homes with improved airtightness.

Over recent years much has been made about delivering carbon reductions to help households save money through reducing energy bills, but as recent experience with the Green Deal has shown, a purely financial and environmental benefit approach has limited success in convincing people of the value of change. Our analysis to date, although at an early stage, suggests that focusing on some heath and comfort variables may make it easier to attract tenants who may be willing to pay more.

Figure 4 – Whole-life carbon performance against change in rents

Click on the image above or here to see a large version >>



We would like to thank Maiia Guermanova and Juan Lafuente from Sturgis Carbon Profiling for their assistance and advice in preparing this article.