Scottish Housing Day: The balancing act in the journey towards Net Zero
by Shoosmiths LLP
Reflecting on Scottish Housing Day's theme of sustainability for this year, we consider the balancing act faced by developers in dealing with an ever changing set of challenges in their drive to Net Zero.
Scottish Housing Day 2022 shines a spotlight on sustainable housing.
It is no secret that the housebuilding sector has a key role to play in delivering the ambitious targets set by the Scottish and UK governments in the drive to net zero and so there is a real pressure on housebuilders to be at the forefront of providing products that are sustainable.
However, the journey to providing sustainable housing products will not be an easy one and developers face a constant balancing act with the other challenges faced by the sector at this time – including meeting Scotland’s chronic housing shortage in an economic climate that has seen construction costs soar and a cost-of-living crisis which is unprecedented.
It is well documented that Scotland is currently suffering a shortfall of around 100,000 new homes and so in a world of finite resources and competing challenges, housebuilders cannot afford to focus all their attention on the drive to net zero to the exclusion of the others. Resources, budgets and priorities need to be constantly re-assessed to ensure that sustainability goals can be delivered whilst also maintaining a focus on unit numbers and overall quality standards. Even when there is an added push for delivery of units, for example in the run-up to year end, the drive to net zero cannot just be parked or dropped as an overarching aim or target.
As housebuilders drive to deliver those new homes required to help quell the housing shortage (and meet their own organisation’s targets), there is no hiding from the recent rampant inflation in construction costs, resulting in an upward price pressure on development costs already forcing developers to reassess the viability of projects. The increasing requirement (or desire) to provide sustainable products places even further strain on that viability and adds to the “up front” costs incurred by housebuilders before they see any recover of such costs when those new homes are sold.
Developers are also balancing regulatory requirements with greater customer demand for sustainable products. Take electric vehicle charging infrastructure, for example. Although the Scottish Government has announced that we should expect further regulation in this area (following in the footsteps of England) housebuilders are already experiencing constant changes in client expectations as that dialogue continues to evolve, with some choosing to “future-proof” products for their end-users. However, when it comes to sustainability, even providing the minimum equipment mandated by local planning authorities can come with a hefty price tag, let alone going above and beyond the basic regulatory requirements whether to meet an organisation’s own sustainability targets or to meet customer expectations in a world where the landscape never stays the same for long.
We must also remember that it is all very well introducing new energy efficient measures to achieve the greater good of sustainability to tick a box, but whilst there is sometimes a perception that more sustainable automatically means cheaper, that is not necessarily the case. In fact, when the Scottish Government announced its new Heat in Buildings Strategy last year it was acknowledged that in some cases new zero emissions systems will cost more to run than the fossil fuel systems they replace. As such, housebuilders are constantly challenged to review the lifecycle cost of any such measure to assess the long-term affordability (taking into account their installation costs as well as the running costs for the end user).
So, to bring us back to the original question – how do housebuilders balance the focus on sustainability with the other challenges currently faced by the housing sector, without the scale tipping to one side or letting something slip entirely? It is clear that there is no straightforward answer and developers face a period of uncertainty as they try to navigate the constantly changing landscape, allowing them to retain enough capital within their organisation to provide the quantity and quality of homes that the sector demands whilst ensuring that they each do their fair share in the drive to net zero.