As voting begins on one of the most closely contested General Elections in recent history, one issue that has almost completely slipped off the radar is that of sustainability.
Whilst Labour and the Conservatives go head to head to try and become the majority party in parliament and the smaller parties jostle to be included in a coalition, issues such as the economy, employment, immigration and tax are taking centre stage.
However, the issue of sustainability is never far from the news headlines. At the end of April 2015, the government was ordered by the Supreme Court to take action on air pollution by the end of the year. This article highlights that although sustainability may be taking a back seat in this election, it’s an issue that the next government won’t be able to ignore.
The UK has many looming deadlines when it comes to carbon emissions. For example, the country is committed to producing 15% of its energy from renewable sources by 2020 (which currently stands at 4.3%) and is aiming to reduce the UK’s greenhouse gas emissions by at least 80% (from the 1990 baseline) by 2050.
On top of this, new regulations due to be introduced in 2018 mean that owners of the least energy efficient buildings in the UK will face restrictions on their ability to lease their property. These will include buildings with an EPC rating of F and G and is set to affect more than 680,000 commercial properties in England and Wales. However there is a lack of certainty as to how these regulations will be implemented and how it will affect the market, with the government yet to fully disclose any real details.
Indeed, whilst it’s widely accepted that energy efficiency measures represent the most cost effective means of cutting carbon emissions, there is concern that measures such as the Green Deal and green building standards face disruption in the next parliament. This election is generating feelings of uncertainty relating to the implementation of many mandated issues, with many people ‘in the dark’ as to how they will be implemented and what the costs will be. With the potential of a referendum on the UKs participation in the EU also on the horizon is instability set to stay?
The need for investment
Following on from this, the question is how this uncertainty will affect the issues of development, investment and values. We could see reduced investment because of the looming green taxes, or alternatively increased investment due to better quality property stock delivering better yields through reduced overheads. Indeed, people are currently unsure as to whether ‘green buildings’ represent a sound investment or if they will result in a price premium.
The elephant in the room is to what degree investors care enough about sustainability. Green buildings may be worth more but the question is whether or not they’re worth proportionately more than the cost of achieving ‘green’ status in the first place relative to end market values.
Improved energy performance resulting in increased construction cost should be an election issue that is as pressing as any other – but it’s all but absent from current political debates. However, it’s an issue that simply can’t be avoided at a time when the UK economy is still in a state of fragility.
Therefore, is it responsible or indeed ethical for political parties to indicate to the electorate that they intend to build around one million new homes by 2020, without also acknowledging the fact that construction costs could rise above real term increases in market value, this, ever reducing development yields? Given this I personally don’t see how it will result in the building boom that this country so desperately needs making those figures completely unrealistic.
To offset this, either the cost of construction needs to be reduced through investment in new technologies, materials, skills and processes, the value of properties to rise or the government to heavily subsidize new construction. Whatever the solution, the potential tightening of migrant worker policies, the chronic undersupply of homegrown tradesmen and the stricter enforcement globally on construction raw materials means that the cost of construction is only likely to rise further. And this raises one very big question: can the market stomach increasing property prices?
Of the main parties, the Liberal Democrats are perceived to have the strongest green credentials, followed by Labour and then the Conservatives, but of these environmental, economic, social and moral factors, who sets out a truly long term vision, not just for short term gains but addressing the long term pain. One thing is for certain – whoever forms the next government will need to move quickly to deliver more policy certainty in terms of sustainability, as the pressure to cut carbon emissions is only set to grow in the future and the legislation will become even more stringent.