Shares in some of the UK’s biggest housebuilders rose sharply last month, on the news that the government proposed to relax rules that would have hindered them from polluting waterways.
The nutrient neutrality rules would mean they had to clean up wetlands and other damaged areas, if they built houses that could overload a local sewage system. The government announced it would scrap the requirement, and the impact on housing shares was dramatic.
That day, Persimmon, Taylor Wimpey and Barratt Developments were among the top 10 risers in the FTSE share index. Persimmon shares rose by 5.3%, Barratt Developments 3.8%, Taylor Wimpey 3.3%, Crest Nicholson 7.4% and Vistry 4.1%. None of these five companies have donated to the Conservatives, but they illustrate the effect on the industry at large.
The rule changes have been postponed, as the House of Lords thwarted ministers’ original plans. The government is still determined to scrap them, despite concerns this would add to the burden of pollution in UK rivers.
These impacts clearly illustrate how closely the fate of housebuilders and the construction sector is tied to government actions. Little wonder that the builders are so keen to wade into the political arena as major donors.
Nutrient neutrality is just one part of a much bigger picture, as the Guardian’s investigation into political donations from the housing industry shows. Housebuilders have benefited to the tune of billions from delays over the past eight years to rules that would have required them to build new homes to a low-carbon standard.
About a fifth of the UK’s greenhouse gas emissions come from housing. The vast majority of the UK’s housing stock is old and will require retrofitting to plug leaks and install heat pumps and solar panels. This is a mammoth task that will take at least a decade.
Building new homes to be low-carbon from the outset costs much less, and is a no-brainer in climate terms. It also brings down bills – a report in 2021 found the average household would save at least £200 a year in a new-build that was properly insulated and used low-carbon energy, a sum likely to be much greater today.
Housebuilders have little incentive to take these steps by themselves, because it costs money. But those costs are tiny compared with the cost of retrofitting houses later. Compelling construction companies to equip newbuild houses to be low-carbon would not be difficult, and under proposals by the last Labour government for a zero-carbon standard, maintained under the Conservative-Liberal Democrat coalition from 2010 to 2015, all housebuilders would have had to meet such requirements from 2016.
Those requirements were scrapped in 2015, not long after the general election won by David Cameron that brought a strong Tory majority. (Since then, Cameron has made the case for “muscular intervention” by Conservative governments to shift to a low-carbon economy.) Cameron did not respond to a request for comment.
Yet the technology needed to make homes low-carbon is not new. Heat pumps have been available for years, and their rapid take-up in other countries in recent years has spurred a wave of innovation and manufacturing that has made them cheaper. Solar panels started falling rapidly in price more than a decade ago, though they have now increased again slightly owing to component shortages and recent inflation. Building houses with effective insulation requires higher grade materials and better design, but both are available.
The UK needs more houses, and building rates in recent years have fallen woefully short. Housebuilders complain that the government does not help, through its restrictive planning laws – though what the industry tends to gloss over is that many major builders hold large “land banks” with space for scores of thousands of unbuilt homes, already with planning permission. They can often make a notional financial return simply from owning this land, as land values increase.
According to figures compiled for the Guardian from the E3G thinktank and the MCS Charitable Foundation, which certifies elements of green building, the costs of kitting out homes are about £8,530, of which a 4kWhp solar PV system cost £1,100 and £,1680 for a battery, plus £5,750 for an air-source heat pump.
These costs have risen in the last two years, owing to inflation and supply chain problems. Before the cost of living crisis, the Climate Change Committee estimated that the cost of meeting the scrapped zero-carbon homes standard would have been about £5,200 per house.
The average cost for a retrofit, according to MCS data in 2023, is almost £33,000 for an air-source heat pump and solar PV system, of which £13,000 is for the heat pump, £9,377 for solar panels, and £9,800 for an average-sized battery.
It makes little sense for homeowners, taxpayers or the climate when developers are allowed to shrug off these costs in the interests of saving money for themselves. Lord Deben, until recently chair of the climate change committee, has warned repeatedly of the impact. He takes a scathing view of the sector: in the nutrient neutrality debate, he accused the government of “subsidising the housebuilders”.
He told the Lords: “The number of houses built has nothing to do with this at all – it is about whether the housebuilders think that that number will keep the price up at the level at which they have it. The housebuilders are not building the houses they have already got planning permission for in areas which are not in any way affected by this. The number of houses in this country is not reaching 300,000 because the housebuilders have bought the land at a price which means that they can sell only at a level which is too elevated for the present time, with mortgages as they are. Let us not kid ourselves that, by voting against this, we will in some way reduce the number of houses, because we will not.”
He added that the amendments from the government were there to “subsidise the housebuilders” as they would have meant that the taxpayer would pick up the bill for nutrient mitigation schemes, rather than the polluters.
Grant Shapps, when energy secretary, was asked why the government refused to require developers to kit out newbuilds with solar panels. His response was that the government wanted to be “technology neutral”, meaning that people might prefer to make their homes low-carbon in another way. Yet it is difficult to see what alternative would improve on solar panels, a widely available clean technology that can be fitted more easily when a house is being built and planned than added afterwards, not least as houses can then be built to face the right direction for the panels to catch most sunshine.
In making his U-turns on net zero last month, Rishi Sunak vowed to “make big decisions in the long-term interests of our country”, and ensure that the costs of net zero did not fall on consumers. But as the Guardian’s research shows, the government has been prepared to let tens of billions of pounds of cost fall on newbuild homeowners, when the alternative would mean inconveniencing Tory donors.
