Written evidence submitted by the National Trust (DHH0105)

With our staff, members, volunteers and supporters, the National Trust is the biggest conservation charity in Europe. We protect and care for places so people and nature can thrive. Many millions share the belief that nature, beauty and history are for everyone. So we look after the nation’s coastline, historic sites, countryside and green spaces, ensuring everyone benefits. For everyone, for ever.

Introduction
 

1. Climate change is the greatest threat to the places the National Trust looks after, with hundreds of historic buildings and land managed for people and nature at risk. We recently announced our own commitment to reach net zero emissions by 2030 and plant 20 million trees on our land to help the nation address climate change. We also have a longstanding and pioneering renewable energy programme that has delivered more than 70 renewable energy installations at our places (including both domestic and other types of property) since 2013. Addressing the energy efficiency of domestic buildings will be a vital part of delivering on the Government’s net zero ambition, and we believe this needs to be acted on as soon as possible.
2. The English Housing Survey indicates that around 22% of the total housing stock in England was built before 1919 (known as ‘traditional’ buildings), and these constitute around 35% of privately rented homes in England. This goes up to 43% in Wales according to the ONS. A significant proportion of our homes are therefore traditional buildings, and they contribute significantly to the distinctive historic qualities of our countryside, villages, towns and cities. These buildings provide a physical reminder of our shared past and contribute to a sense of community, helping create the character and historic interest that attracts visitors and tourists. Traditional buildings also help make places attractive to live and work and offer substantial economic and social benefits through their contribution to quality of place, individual wellbeing, and the visitor economy.
3. The National Trust has a let estate with over 5000 privately rented homes, most of which were built pre-1919. A significant amount of them are also rural and remote and as such do not have access to mains gas or a large pool of skilled assessors or contractors. As a conservation charity and landlord, we are required to balance the protection of historic significance with ensuring buildings are comfortable, affordable and take account of environmental pressures. Our let estate has a high heritage value but surprisingly few of these buildings are designated as listed. This however does not mean that such buildings are not historically significant or sensitive, and we have a legal duty to look after them for everyone, for ever. These buildings are often a key part of what makes our most iconic landscapes so distinctive and evocative.
4. Reaching net zero as an organisation will necessarily involve tackling the carbon emissions of our let estate. We are investing in our properties to make them more sustainable and affordable for tenants to heat, but without compromising the historic quality or technical stability of our traditional buildings, which were specifically built to be breathable and manage air and water within the structure, rather than exclude them completely as in modern buildings. This was a significant task even before coronavirus. However, the loss of income we’ve experienced as a result of Covid19 – due to the closure of our properties, cafes and shops, reductions in membership and impacts on our investments – will make delivering on this ambition much more difficult than before.
5. This submission seeks to offer the Committee a view on the challenges and effectiveness of policy interventions currently seeking to support decarbonisation of heat in domestic properties based on the National Trust’s experience with its let estate. This submission has a particular focus on the Energy Performance Certificates and their poor performance as a tool for baselining and measuring carbon emissions in buildings and driving decarbonisation. We are speaking primarily from our experience of traditional homes (i.e. those built before 1919), and with particular reference to the private rental sector, but many of the points made and issues we identify apply to buildings more widely, especially those in rural locations. We also make a number of recommendations for how the Government could better support this effort.

Summary of Key Points 
 

• Switching to low carbon energy sources in buildings will play a key part in delivering the Government’s net zero ambition. Investing in upgrading and retrofitting homes as part of delivering a Green Recovery from Covid-19 would bring significant long term social and environmental benefits. This must be done in a way which is sensitive to the structure, heritage and landscape value of traditional buildings as well as take into account rural housing which have more limited options with heating fuels. These buildings make up both the character of our country and a significant proportion of the UK’s housing stock.
• We urgently need action on EPCs to ensure they are fit for purpose and are a reliable source of information to enable a homeowner or landlord to make decisions on their property. In order to do this EPCs need to use accurate information on building performance, ensure recommendations provided take property fabric and construction into account (to avoid unintended consequences), and provide realistic installation costs and projected savings for each measure.
• The current use of the Energy Efficiency Rating on EPCs as the primary tool for baselining, measuring and incentivising property owners to improve carbon emissions and decarbonising homes is not appropriate or effective in their current form. EPC methodology can create perverse incentives, where high carbon emitting heating options achieve higher energy efficiency scores because they are cheaper to run.
• This is particularly problematic in the context of the private rental sector, where landlords will be required to bring properties up to higher EPC scores in coming years in order to let them, which could drive landlords towards measures which are counter-productive in carbon terms.
• We therefore believe it will not be possible to achieve the dual aims of decarbonising heating in homes to reach net zero, and attaining high energy efficiency standards in all buildings, if we continue using the Energy Performance Certificate (EPC) in its current form.
• Public investment and support will be needed to meet targets for decarbonisation, especially in light of the current economic context, and substantial losses incurred by organisations such as ourselves as a result of Covid19. A specific plan to support decarbonisation of traditional buildings and those in rural areas is needed. There are measures that Government could take, including equalising VAT on renovation and retrofit of existing buildings with that of new build, which would help deliver improvements at scale.  

Energy Performance Certificates as a tool for decarbonisation

Background

6. Energy Performance Certificates (EPCs) play a central role in the Government’s approach to driving energy efficiency in buildings. They are the primary tool used to measure the performance of a building, not only to inform buyers, residents and property owners, but to drive change. The Government has placed the achievement of target EPC bands at the heart of its strategy for improving energy efficiency under the Clean Growth strategy.
7. EPCs are also used as part of the regulatory regime for privately let buildings. Currently, under the Minimum Energy Efficiency Standards (MEES) residential landlords are only able to let properties with an EPC score of E or above. The Government’s current proposal is to increase this to Band C for new tenancies in April 2025 and all tenancies in April 2028. There is a series of exemptions which can enable a property to be let if it cannot meet the required EPC standard, although these tend to be cost based rather than reflecting technical building considerations. Listed properties and those in conservation areas may be considered exempt from MEES if certain criteria are met. However, as noted, most of our let estate is not in these categories, even though we consider the majority to have high heritage value.[1]
8. As buildings are the third largest carbon emitting sector in the UK today,[2] decarbonising and improving their energy efficiency is a powerful tool in the fight to reach net zero emissions in the UK. However, we have real concerns about the fitness of EPCs as the primary policy tool to achieve this purpose.

What EPCs measure

9. EPCs have two ratings - the Energy Efficiency rating and the Environmental Impact rating. The Energy Efficiency rating looks at the estimated cost of energy use and is the rating that defines the main EPC band that a property achieves (A+ to G). The Environmental Impact rating assesses carbon dioxide emissions of the building and is shown on the blue coloured graphic on the last page. Critically, in the new updated EPC the Environmental Impact rating (which assesses carbon emissions) has been omitted and the remaining information has been simplified to such an extent that it provides no useful guidance for homeowners or landlords. Owners are also offered recommendations about how to improve the energy efficiency of their home – though in most cases these are not the most efficient or correct interventions for the property.
10. While energy efficiency and carbon reduction are closely related there are some key differences in how they might best be delivered. Decarbonising is often reliant on changing heat sources (from use of mains gas to LPG or renewables etc.) and requires technical understanding, greater capital investment and can incur higher operational costs. There is a wider range of measures that can be used to improve energy efficiency, which can be ranked on a relatively simple cost per energy saving basis. While improvements to energy efficiency can in many cases both save people money and reduce carbon emissions, it is not always true that the option that is most environmentally sound and viable at a property is necessarily the cheapest to install or run.
11. The effect of this is that installation of lower carbon heating systems can actually reduce an EPC score where the fuel is considered to be more expensive than other higher carbon fuels. For example, for traditional buildings in rural areas, without mains gas, low carbon heating options are likely to be limited to heat pumps (coupled with top up heating from electricity, LPG or wood-burning stoves) or LPG (ideally using a renewable gas). However, the use of LPG will decrease an EPC score comparative to an oil boiler due to higher fuel costs.[3] In effect, EPCs encourage the installations of new oil boilers, despite the need to phase out oil-fired heating.
12. For these reasons Energy Efficiency ratings are an inappropriate way to drive the most effective de-carbonisation solutions and can create perverse incentives, where high carbon emitting heating options achieve higher scores because they are cheaper to install and run.
13. As organisations move to include Greenhouse Gas Protocol Scope 3 emissions in their carbon reports and targets, they will need a tool which accurately reflects the carbon emissions from rented properties. Given the shortcomings identified above, EPCs are not a useful measurement tool for this purpose, and one will need to be found.

EPCs and assessment of traditional buildings

14. Albeit flawed for the purpose of driving decarbonisation of heat in homes, as discussed above, EPCs currently remain the only widely available methodology to offer a baseline and measure improvements to the energy efficiency of homes and provide even an indication of the carbon footprint of a home. The reliability and accuracy of the score provided by an EPC is therefore fundamental. However, it is widely felt that the low reliability of EPC’s is having a significant impact on the delivery of meaningful energy efficiency measures and the successful implementation of policy and MEES. A report by the Sustainable Traditional Buildings Alliance, commissioned by the National Trust and Historic England goes into detail about the problems with EPCs and outlines the need to take a ‘whole house approach’.[4] We won’t recreate all the detail here, but some of our concerns include the following:
• The overall ability of the EPC assessment process to fully evaluate a building is limited – particularly when applied to traditional buildings. EPCs for existing buildings are drawn up on the basis of a site visit and a desk-based assessment by an EPC assessor, using a methodology known as RdSAP to determine how assessors should measure different characteristics, such as the thermal performance of the walls or the window types. The RdSAP methodology relies on making assumptions that tend to assume worst-case scenarios and make older houses more likely to receive a low score, which doesn’t necessarily reflect their actual performance. For example, where double glazing is present, but window age is unknown, full glazing details can only be entered where the frame is PVCu. For most traditional properties, timber frame windows are preferred; this means that if the assessor cannot determine their age they will be allocated a relatively poor u-value even if in reality they perform much better.
• Some improvement measures which are more common in older buildings (e.g. internal window shutters, chimney balloons) are deemed temporary or removable by RdSAP and so cannot be included in the assessment. Some of the most-straight forward measures (e.g. draught proofing), which in practice are known to have a significant impact on thermal comfort and heat losses, and are appropriate with historic fabric, will not therefore result in significant improvements in the Energy Efficiency rating.
• The predominance of open fireplaces is likely to penalise older properties, even if they are not used for heating. Even where they have been replaced with wood stoves or (often in rural areas) boilers, which can be highly efficient, there is no way to recognise this in the RdSAP software. As discussed above, installation of lower carbon heating systems can result in lower EPC scores than for example new oil powered boilers.
• The training for EPC assessors is minimal with no requirement for specific training in building physics. The extensive use of default values and reliance on interpretation by assessors with varying levels of skill have contributed to inconsistencies and variations in assessments even on the same property. For example, one of our properties has had three EPC assessments. In 2015 it scored 51 (E). In 2016 it scored 28 (F), and finally in 2018 it was rated as 42 (E) – though no work was undertaken to the property between these assessments. Another property was assessed in 2013 and achieved a score of 46 (E). In 2016 its score had dropped to 28 (F), again with no alterations or changes to the property. The difference between (E) and (F) decides whether a property can legally be let, unless exempt.
• There is also a widely recognised problem that the recommendations for energy efficiency improvement measures that an EPC generates (such as double glazing or solid wall insulation) are often inappropriate for traditional properties. These measures can cause damage to traditional buildings and create issues of poor indoor air quality, mould or damp, or even structural problems. This is a result of treating the building as a modern build where water and air are excluded, as opposed to historic and traditional builds and fabric which are deliberately built to manage these factors.

EPCs and the Minimum Energy Efficiency Standards trajectory for the Domestic Private Rental Sector

15. Overall, we believe that the use of EPCs as a tool for measuring and assessing the carbon footprint of homes and driving actions to support decarbonisation for individual properties is critically flawed, and our experience has been that their application to traditional buildings is particularly problematic.
16. This problem is compounded by the way in which EPCs are used to set and drive progress towards national targets for reducing emissions from homes. One of the ways that this is being pursued is through the setting of minimum energy efficiency standards (MEES) for privately rented buildings. The Government is currently consulting on improving the energy performance of privately rented homes in England and Wales, and proposes a trajectory that will require all homes to reach Band C - by 2025 for new tenancies and by 2028 for all tenancies. We will be replying to that consultation with a more detailed response, but we offer some high-level thoughts for the Committee here.
17. While we support targets in principle as a means to drive decarbonisation and energy efficiency improvements across the entirety of the UK housing stock, reaching EPC band C will not be appropriate or achievable for all properties. Without greater consideration of how the MEES trajectory will be achieved for traditional buildings and those in a rural setting, the approaches Government proposes in its current consultation may lead to perverse consequences  and actually reduce the availability of rental accommodation if landlords are unable or unwilling to make changes, or cannot afford to do so. Although the Government proposes setting a cap on the costs landlords incur in making changes, costs associated with implementing the right energy efficiency measures necessary to reach Band C (using the current methodology) are significantly higher for traditional buildings than for newer buildings. This is particularly true in rural contexts where energy sources may be limited. Inappropriate retrofit measures can also cause damage – both to the building and, in some cases to human health. There is no recognition of this in the Government’s proposals.
18. For example, a strict target of EPC Band C for all private rented properties will require more complex low carbon measures to be installed as standard, which is likely to be prohibitively expensive for many landlords. Costs vary widely depending on the circumstances and technology required, but to give an example, installing an air source heat pump in a domestic property can cost in the region of £10,000, plus several thousand pounds in additional costs for upgrading radiators and the heating distribution system, to ensure the heat pump works as intended in an older building.[5] There are often additional costs that occur relating to the historic nature of a building if physical adjustments, advice, or consents are required. Our modelling shows an investment of approximately £98 million would be required by the National Trust to bring our properties to Band C level using appropriate energy efficiency measures and low carbon energy sources. There will also be a number of properties that will not be able to reach this target using current EPC methodology, and this is not unique to the National Trust. As discussed earlier (and problematic in EPC terms), it’s also not necessarily the case that installing low carbon energy sources reduces operational costs – in addition to short term installation costs there can be additional ongoing fuel (particularly if using biofuels or electric heating) and maintenance costs.
19. The availability of public funding to support the capital and operational costs will in some cases be the only way that such significant changes can be delivered, and this is particularly important when it comes to privately let traditional or rural properties which require substantial investment in order to reach Band C. Most National Trust property is held inalienably, which means that we are unable to sell it – but being unable to let a property would make their maintenance much more difficult, and remove vital, good quality housing from the reach of people who need it. However, for other landlords, sale or even demolition in favour of new build may be a tempting alternative – which would not only put heritage assets at risk, but likely result in greater overall carbon dioxide emissions in the long run, once the whole life costs of demolition and rebuild are taken into account. Owner-occupiers are under no obligation to make changes to support decarbonisation of their home, and so moving properties out of the private rental sector will not help on our path to net zero emissions.
20. Taking a blanket approach that drives the installation of uniform measures across all homes in order to drive faster action may therefore have unintended consequences – and may do little in terms of actually reducing emissions, given the perverse incentives created by EPCs which favour cost rather than carbon. Equally, straight forward exemptions from EPCs that place no expectation of improvement in the energy efficiency of listed buildings, and a continued lack oft appropriate tools for assessing and making recommendations for improvements, may not be the answer either. Recent research by Historic England identified substantial potential for improvements in energy efficiency in traditional buildings, finding that it could be possible to reduce emissions by up to 60% through sympathetic refurbishment and retrofit.[6]
21. However, given the ineffectiveness of EPCs, particularly in relation to traditional buildings, owners and landlords effectively have no tool available to them to help them make the right choices long term, while conserving any historic features that the property might have. This means real opportunities are being missed, and real risks are being realised.

The way forward

22. There is a strong case for protecting traditional buildings for the beauty and history they evoke. These buildings enhance the character and distinctiveness of the places where people live, and provide a physical reminder of our shared past. There are substantial economic and social benefits associated with historic buildings, which contribute to quality of place, individual wellbeing, and the visitor economy. [7] Investing in upgrading and retrofitting would bring significant long term social and environmental benefits, and enable us to make the very best use of our buildings while creating warmer, more sustainable homes for everyone. And in carbon terms it won’t be enough to ensure all new builds reach the highest possible energy standards: we must address our existing housing stock, including rural homes and the 22% of homes that were built before 1919, which we know to be particularly challenging and badly served by the existing EPC process. In this section we make some specific recommendations for how the Government could achieve this more successfully for domestically let homes.
23. This submission has focused on the barrier and challenge that EPCs currently present in terms of decarbonising homes. We believe reform is needed to the EPC process to make them fit for the purposes to which they are being put. This could include:
• Improving their underlying methodology and accuracy, particularly for traditional and historic properties, using up to date information on building performance. Recommended measures need to take into account property fabric and construction. There may even be scope for a form of EPC that can be specifically applied to pre-1919 homes which offers a more tailored assessment and recommendations that reflect the nature of the building. There are a number of organisations who already help inform such improvements and might be able to contribute to such a scheme with support from Government.
• A methodology that considers the importance of good repair and maintenance and the impact of behaviour will lower the requirement for heating in the first place. Some impactful changes can even be made without physical changes to the building. For example, the behaviour of residents and their heating controls is highly influenced by experiencing draughts and cold in a manner which the EPC assessments currently have no way of taking into account.
• Improving the skill set and understanding of EPC assessors, particularly in addressing traditional buildings. Investment will also need to be made in ensuring adequate there are adequate skilled installers to provide good quality installations and maintenance.
• Prioritising the Environmental Impact score or developing a new rating to better assess the options for de-carbonisation. This should focus more on energy and heat sources and could potentially be linked to grant or incentive schemes to address the challenges of higher capital and operational costs that tend to be intrinsic to such improvements.
24. Beyond the EPC framework there are other policy tools and steps that the Government could employ. There is also significant opportunity in terms of decarbonising. Recent research by Historic England also shows that embodied carbon (i.e. that generated through construction, use, maintenance, demolition or reuse) is significantly underestimated in calculations of the carbon footprint of new buildings.[8] When you consider the whole life of a building, the relative carbon footprint of a historic building can compare favourably against the alternative of demolition and new build. In terms of contributing to net zero by 2050, Historic England found that:

“When a typical historic building – the Victorian Terrace – is sympathetically refurbished and retrofitted, it will emit less carbon by 2050 than a new building. But only if the whole life carbon of the building is considered”

25. The same research also identified substantial potential for improvements in energy efficiency in traditional buildings, finding that it could be possible to reduce emissions by up to 60% through sympathetic refurbishment and retrofit. And there are many technologies now available that offer solutions that can work in some traditional homes – air and ground source heat pumps for example, both of which we have experience of installing in our estate. However, the financial investment required to deliver such increases to efficiency is very significant, and in the wake of the coronavirus pandemic, where many heritage bodies are reeling from significant financial losses, there is a risk that these costs could be prohibitive.
26. The Chancellor recently announced a £3bn package for energy efficiency, £2bn of which will support private owners in retrofitting homes with vouchers worth up to £5000. This is a really welcome first step towards delivering on their manifesto commitments, and starting the nation on the path towards net zero. However proper assessment of a building should be conducted before recommending the most suitable measures to fund. There is a real danger that if it is implemented in a blanket way, pushing “common” measures such as double glazing, exterior cladding, or solid wall insulation will cause unintended consequences. The requirement for installations to be carried out by trademarked contractors is helpful, but not a guarantee that the specific needs of heritage buildings will be considered.
27. A specific plan is needed for the rollout of appropriate measures, including heat sources, to support decarbonisation of traditional buildings and those in rural areas. This plan must consider the need to build skills and capability to deliver, however the availability of advice and the ability to undertake installations and retrofits in traditional buildings relies on the health of the heritage building sector, which is under severe pressure at the present moment. It needs support to build the skills and capability to undertake the work needed to make our traditional building stock ready for our low carbon future. There is a significant lack of knowledge and skills to deliver high quality and successful installations to traditional builds on this scale, which limits the practical delivery of appropriate improvement measures.
28. The Government also needs to ensure that sufficient funding is available over the coming years (not just in the short term) to support landlords particularly to make changes that are appropriate to support decarbonisation where possible without incentivising demolition, damaging measures, or the removal of housing from the private rental sector. Refit of traditional buildings and those in rural areas could be an area of growth in the UK, providing new jobs and driving innovation, particularly in the heritage sector, where we could seek to be a world leader, with the right investment.
29. One straight forward measure that the Government should take to support this effort is to reduce the VAT on housing repair, maintenance and restoration, which is currently set at 20%. This compares to the zero-rated VAT that currently applies to new build construction, which only increases the incentive to demolish and rebuild, rather than make improvements to existing buildings, including the work that may be needed to support installation of low carbon heating. This measure was supported by the recent Building Better Building Beautiful Commission, and could have multiple economic benefits in terms of encouraging spending on repair and retrofit, which benefits the construction and wider heritage sector. With a reduction in capital spend by many organisations likely over the coming months as they are forced to reassess their capital spending, there is a related risk to the wider heritage service and supply sector, which will have a long term impact on the care of heritage assets and ability to deliver refit and restoration activity - 40% of smaller crafts-based businesses and professional services (architects/surveyors/ engineers) forecast business failure within 3 months, according to Historic England.
30. There is evidence that VAT on repairs and maintenance as it stands has a suppressive effect on economic activity and has resulted in consequential loss of capacity - especially among heritage specialists with the skills to adapt historic buildings to meet our future needs, with a negative impact on reviving or promoting enterprise, craft skills and apprenticeships in the heritage sector.[9] According to the Federation of Master Builders, a cut in the VAT on home improvement works would stimulate the industry, removing a barrier to homeowners upgrading their buildings.[10]
31. Research by Experian in 2015, drawing on evidence of the impact of cuts to VAT on restoration and repair in the Netherlands and the Isle of Man, estimated that reducing the rate from 20% to 5% would have generated a stimulus worth £15bn over the five-year period to 2020, particularly benefiting SMEs. In addition, they estimated that this would have led to 42,050 extra full-time equivalent construction jobs by the end of the five-year period, with a further 53,430 jobs in the wider economy. This came at a projected cost to the Treasury of £921m in the first year of implementation, once revenue gains and losses from lower unemployment benefits, higher income tax and national insurance are taken into account.[11]
32. While the evidence base used in the Experian report is based on a cut to VAT that applies across repair and restoration to all existing buildings, it could be possible to specifically direct the cut towards repair and restoration work undertaken specifically on traditional or historic buildings. While this would have a lower stimulus effect across the economy as a whole, it would still offer significant benefit in assisting homeowners and landlords with the particular costs that are incurred with upgrading energy efficiency in these buildings, and would offer more directed support to the heritage construction sector.

December 2020

Appendix A