Delivering net zero for Scotland's buildings - Heat in Buildings Bill: consultation analysis

5. Property Purchases

This chapter covers questions about the proposals for legislating about changing heating systems when a property is purchased. The Scottish Government sought opinions on the proposal to require the end of polluting heating systems following a property purchase, a proposed grace period after purchase and whether a cost ceiling or cap is necessary under such circumstances.

Chapter Summary

Very mixed views were evident regarding these proposals. While many strongly supported introducing a requirement to end the use of polluting heating following a property purchase, many, particularly individuals, were strongly opposed. Similarly polarised views were evident in relation to giving Scottish Ministers powers to extend the circumstances in which people could be required to end their use of polluting heating. There was, however, more support for both a grace period and cost-cap, but with no clear consensus on which of the proposed options for each would be most appropriate. Qualitative comments were also mixed, with respondents raising a range of issues and concerns, particularly the potential negative impact on Scotland’s property market.

Over half (54%) of respondents who answered Q9 supported the requirement to end the use of polluting heating following a property purchase, with 30% expressing strong support. However, 40% of respondents opposed the proposal, with 31% strongly opposing. Individuals were more likely to express opposition than organisations, with 35% of individuals strongly opposing the proposal compared with 9 % of organisations.

Just over a third of respondents commented at Q9, with the range of comments reflecting the mixed views evident in the closed question . The most common theme, and one which was raised repeatedly in responses to the questions in this section was the concern that the legislation would negatively affect the property market. This was raised by a variety of organisation types but was particularly prevalent among the local authorities who commented. Views included concerns about the impact on affordability and on buyers, but several also raised concerns about sellers, specifically that sellers may feel the need to sell for a lower value or to retrofit their homes before selling. Depending on the length of the grace period and exemptions for specific types of building, respondents noted that buyers may not want to take on the additional cost or work of changing heating systems and therefore choose not to move. Others raised concerns it may create negative equity in some properties.

Many also noted that buying a property is already expensive. Adding the extra costs associated with transitioning heating systems could push many buyers to the limits of affordability and may stop them from purchasing homes. Specific groups likely to be affected by the legislation were highlighted by many respondents. These included first-time buyers, young people, people living on low incomes, and small businesses. At an event hosted by Glasgow NW Citizens Advice Bureau, participants discussed how properties in Scotland are selling for 10-20% over the home report value. They felt that this already made it difficult for first-time buyers to get onto the property ladder and the requirements to change to a non-polluting heating system would make it even more challenging.

Affordability, in general, was the second most prevalent theme in qualitative comments, though there were multiple strands to this in relation to the property purchase proposals. M any suggested the government need s to provide support, grants and funding to assist with the transition, with several expressing a view that the cost of transition could be too great for many households or businesses. Some highlighted the importance of ensuring the technology, and specifically affordable technology, is available before making changes that could impact so many. Some recognised the importance of providing buyers with an accurate picture of the cost of improving energy efficiency and replacing electrical and plumbing systems in a property before they decide to purchase it, suggesting this could be included in a more accurate and refined EPC or through improved guidance during conveyancing. The emphasis was on ensuring buyers had a clear understanding of the true costs of changing heating systems before buying.

Many provided reasons for their support of the proposal. It was noted that t he proposals are a necessary step in tackling climate change. It was also argued that property purchase is a good point to encourage change as this is often when buyers consider major upgrades or carry out other home improvements after a purchase, and as buyers are already taking out mortgages, they can factor the cost of changes into their budgets.

"Requiring changes after a property has changed hands can ensure that the work takes place alongside other renovations that are often made at this point. It will also make it easier for households to arrange finance, as funds can be borrowed as part of a mortgage." – Individual

At this question, and others in this chapter, several respondents repeatedly questioned the efficacy and waste of changing functioning heating systems for clean heating alternatives because of a property purchase. While some opposed replacing functioning systems entirely, others did advocate for end-of-life boiler replacement to be included as an alternate trigger for the transition to clean heating systems.

Multiple other considerations were highlighted including, from most to least prevalent:

• There was concern among several respondents about how the legislation would be enforced, which they thought lacked clarity at this stage.
• Some noted that the suitability of properties, specifically older properties and multi-occupancy properties, must be considered.
• · A fabric-first approach should be prioritised before enforcing a transition to clean heating.
• · More generally, some opponents felt the legislation was an example of government overreach. Some preferred a market-driven solution, as it would eventually incentivise change.
• · Some asked to include a wider set of heating alternatives as they believed the consultation paper is overly focused on heat pumps.
• · A few highlighted the need to consider temporary accommodation during the transition, which could be challenging depending on rental markets.
• · A few called for safeguards to ensure workforce shortages do not impact timescales, leaving property transactions in limbo as quotes are gathered.
• Some organisations and a few individuals suggested different ways to manage private funding of the changes. Including provisions in mortgages to allow for funding transition costs was suggested, while some organisations suggested incentives such as using Land and Building Transition Tax to incentivise the transition at the time of purchase.
• A few event participants noted a concern that a seller could install a cheap but inefficient clean heating system to ensure they sold their property, which could be more environmentally damaging in the longer term.

Several overarching themes were evident in responses to this and the other questions in this chapter. This included respondents reiterating the importance of providing funding and support if changes like this were to be enforced and time limited. Disagreement with the proposed legislation around property purchases due to a belief that the Scottish Government should not regulate how people heat their homes was mentioned by some, mostly individuals.

Seven in ten (69%) of those answering Q10 supported some form of grace period, with one third 31% opposed. A grace period of five years was the most popular option with 28% of those answering selecting this option, followed by a two year grace period which was preferred by 21% of those answering. Preferences were similar across organisations and individuals , though individuals were more likely to oppose a grace period than organisations (33% compared to 19% respectively).

It should be noted, however, that qualitative comments suggest that some of those who opposed a grace period, particularly individuals, did so because they opposed the proposals in the consultation as a whole. Of the respondents who answered ‘No’ at Q10, 86% were opposed to the property purchase proposals at Q9, and 69% were opposed to prohibiting the use of polluting heating systems by 2045 at Q1.

Two fifths of respondents provided an open answer to Q10 . The most prevalent theme in responses reflected opposition to a grace period. While many respondents expressed general opposition to the legislation without going into further detail , some highlighted their opposition to the Standard more generally by suggesting a grace period would be unnecessary if the legislation is not introduced at all . Others reiterated concerns about the negative impact on the housing market, affordability for purchasers, and concerns about the cost impact of the proposals.

The second most prevalent theme, raised by many, was agreement with the principle of a grace period. Respondents expressed the view that a grace period provided time to gather advice, quotes, grants and funding, but still provided a clear timeframe for purchasers to initiate the transition to clean heating systems.

“Timely access to expert advice, funding (as relevant), suppliers and fitters should mean four years is a practical 'grace period'. This does, however, presuppose that all parts of the delivery programme for Heating In Buildings is working efficiently.” - Individual

Many agreed with the grace period but also noted important provisions. These included:

• Allowing for a fabric-first approach to improve energy efficiency before transitioning the heating system, including set periods for fabric improvements.
• Flexibility to decide grace period on a case-by-case basis, with extensions and further consideration based on property type, such as multi-occupancy buildings and historic properties.
• A grace period with a sliding scale, getting shorter as 2045 approaches.
• Extensions dependent on workforce availability and supply chain shortages.

As a starting point, we consider that a default grace period of 2 years could be appropriate, as within that timescale it should be possible to seek advice, undertake an assessment of the type of system most appropriate to the building and for the work to be completed. The grace period could be extended to 3 years for more complex buildings… Consideration should also be given to enabling an extension to the grace period for issues outwith the purchaser’s control, for example where the work cannot be carried out within the timescale due to installer delays or unforeseen complications with the building itself. – Energy Saving Trust

A longer grace period was suggested by many. Some supported a five-year grace period, whereas others suggested longer, such as ten or up to 40 years. Reasons for supporting a longer grace period included;

• A belief that technology would improve over time, making the transition more feasible for a wider range of properties.
• A concern about costs and the negative impact those could have on households if not given longer to transition.
• A preference to replace heating systems at end-of-life rather than replacing systems that still work due to property purchase.

A shorter grace period was supported by several. This centred on the idea that longer could lead to many people stalling on the transition, prioritising other work in their new home, or being unable to access sources of funding at the time of purchase , such as green mortgages.

Some asked for further clarification before providing a response about grace periods . Clarification was sought on the cost of the transition for a household , the impact of the transition on the environment, loopholes to stop reselling within the grace period, and what type of deals with private lenders have been discussed or agreed upon .

Among those who responded to Q11, 58% were supportive of proposals to apply a cost-cap where people are required to end their use of polluting heating following a property purchase. Over a third (37%) strongly supported the proposal. Individuals were more likely to express strong support than organisations (39% and 26% respectively). One quarter (23%) were opposed, and just under 10% unsure. As at Q10, qualitative comments suggest that some individuals who opposed a cost-cap, did so because they opposed the proposals in the consultation as a whole. Of the respondents who opposed a cost-cap at Q11, 73% were opposed to the property purchase proposals at Q9, and 62% were opposed to prohibiting the use of polluting heating systems by 2045 at Q1.

While support for a cost-cap was recorded at the closed question, the most prevalent theme in the comments provided by three in ten respondents at Q11 was confusion surrounding the proposal and a desire for further information and clarification. While most types of organisation raised this theme, it was particularly prevalent among energy/heating producers. Clarity was sought on any exemptions based on types of property or types of people, as well as further information about funding sources, both public and private. Many requested further clarity on who the cap would apply to, on what basis it would be applied, and questioned how the Scottish Government would ensure it was fair, especially for people who may not qualify for grants but still find the transition unaffordable. Some hoped for a clearer definition for ‘reasonably practicable’, while Common Weal wondered if reinstatement costs, such as redecoration after the transition, are included in the cap.

“There will need to be a mechanism to determine at what point it is disproportionate for the works to be carried out, but no suitable proposal has been put forward in the consultation.” - Scottish Financial Enterprise

“A cost-cap would be difficult to manage. Setting a cap based on a properties floor area does not fully reflect a fair system. Many older properties, for example ex-council houses may have large floor areas, however, they may not be as affluent as modern new build homes with smaller floor areas.” - Renfrewshire Council

The second most prevalent theme, raised by many, was that even with a cost-cap there would still need to be sufficient grants, funding and support to households that need it. Some argued a cost-cap should not be created in lieu of governmental financial support for individuals.

Statements in opposition to a cost-cap were the next most frequently mentioned theme. However, the reasons for disagreeing varied. Several reiterated their opposition to the legislation in general and therefore argued a cost-cap would not be required. A few others thought a cost-cap should not be provided as they argued that the changes should be costed in by buyers and they may recoup costs through cheaper energy bills. A few others suggested the cost of transition be paid for by a tax on the oil and gas industry.

Several respondents agreed with the price cap as they noted that it would help ensure the transition was affordable for individuals. Some others agreed with the proposal as they felt it provided cost certainty to buyers and lenders. A few noted that this may help ease the possible effects on the housing market.

As at other questions, some respondents reiterated their belief that the proposed requirements would negatively impact the housing market. Other less commonly mentioned themes raised about a cost-cap included:

• It could lead owners to pick lower-cost and lower-impact measures rather than investing in the complete transition
• Market distortions, such as inflated costs to meet the available cap premium and the chance for suppliers and tradespeople to profiteer.
• The cost-cap could inadvertently hinder the transition to clean heating systems if many fabric changes are also required, such as in traditional buildings.
• That the cap could provide loopholes which free people from transitioning to clean heating. This would affect the transition, but also potentially leave people in fuel poverty if gas becomes more expensive as it is phased out.

“A cost-cap on the upfront capital costs to install the measures needed to comply with the Bill could be used to ensure that costs to householders are reasonable. However, ‘expensive to upgrade’ or ‘hard to reach’ individuals should not be left behind in the clean energy transition; The cost-cap should not be used for exemption of requirements, or to downscale ambition. This would result in properties remaining cold, damp, and draughty, and would place the occupants in or at risk of fuel poverty and reliant on increasingly out of date heating systems.” - Changeworks

There were similar levels of support for three of the options under Q12: a size-based cost-cap was the preferred option of 26% of respondents; a purchase-price based cost-cap was supported by 24%; and ‘none’ was selected by 25% of respondents. Less than 10% supported a flat cost-cap, and 15% suggested a different approach than those outlined in the question. There were some differences in responses from organisations and individuals, with a size-based cost-cap the most popular option among individuals, while organisations were more likely to select ‘none’ or suggest another option.

Just under a quarter of respondents commented at Q12. While there was varied support for one of the three cost-cap options proposed at the closed question, the most prevalent theme was a request for more clarification, including who would be affected by the cost-cap, how a cost-cap would work, and the likely benefits and disadvantages to households.

The second most common theme, mentioned by several, was support for a cost-cap based on purchase price. The small number of finance providers and bodies who commented on this question were more likely to raise this theme than other organisation types. Respondents favouring this method did so because they felt it related to the ability to pay. Even among those who supported this method there was concern that location in Scotland could still pose a problem, i.e. homes of the same size and attributes could vary in price depending on location, affecting the affordability of the transition for the purchaser.

Support for another option - a combination of methods and greater flexibility in assessing households and purchases - was expressed by several others. While the different combinations of methods varied among those respondents, there was a consensus that individual methods would lack nuance and fairness, and, as the UK Energy Research Centre noted, potentially worsen fuel poverty. Other suggested cost-caps from most to least prevalent included:

• Size-based or squared-metre-based cap as respondents thought this would most accurately consider the transition costs.
• A flat cap was supported by some as it was considered fair and simple.
• A means-tested cost-cap.
• A cap based on the quoted costs of works.
• One that considers location.

“We would suggest a hybrid option needs to be introduced, which kicks in as soon as the most relevant trigger factor kicks in first. For example, setting a cost-cap of both an absolute fixed value and a percentage of property value, with whichever threshold is crossed first for that property representing the cost-cap, is a way of utilising the advantages of both systems. It also allows a level of fairness for regional imbalances and different property prices.” - Association for Decentralised Energy

A few respondents suggested the cost-cap be time-limited to acknowledge changes to costs as technology improves as well as any changes to personal circumstances. A few focussed on the costs themselves, suggesting that rather than a cost-cap, the costs of each improvement should be publicly benchmarked to ensure transparency and avoid profiteering. A few others reiterated their support for a cost-cap as a last resort as it was felt that it could negatively impact the transition by creating loopholes.

Over half (54%) of those who answered Q13 supported this proposal, with 35% strongly supporting it, while 39% opposed. Individuals were more likely to oppose than organisations (41% compared with 26%). A higher proportion of organisations selected the ‘neither’ option than individuals.

Reflecting the mixed views in the closed question, opinion was relatively equally split among the third of respondents who provided an open answer at Q13. The most common theme, reiterated almost entirely by individuals who opposed giving Scottish Ministers extended powers in the future, was a concern about abuse of power and the impact it could have on individual free choice. This included many respondents who reiterated their dislike for the wider Heat in Buildings Bill.

The next most common theme was that many supported the proposal as they believed there should be a future requirement to replace polluting heating systems which had stopped working. Respondents supported this as it was considered a natural point to transition, households would need to spend money on new systems at that point regardless, and it mirrored proposed legislation in the England and Wales. Some caveated their support by noting that boiler failure is usually an emergency situation, in which case there would need to be protections and strong supply chains to ensure households are not left without heat and hot water, especially in the colder months.

Should Ministers set further requirements, more consultation was called for by several, once details had been developed and agreed. Similarly, some others suggested that any future requirements be put forward for parliamentary debate rather than by power being extended to Scottish Ministers. This was to reduce the potential for uncertainty; to enable households and businesses to plan without worrying that requirements would change.

Several respondents requested further clarification about terms presented in the paper – such as ‘affordable, fair and feasible’ – and also on the practicalities and predicted costs of the transition for households and businesses. Some of these respondents felt unable to form an opinion without further information.

Some agreed with the flexibility provided in the proposal to grant Scottish Ministers further powers, acknowledging that it could be useful if not enough homes are sold during the transition period. Some others noted that they thought it would be necessary for the transition to be completed.

“We estimate that the ‘at purchase’ requirement would result in around 700,000 homes fitting clean heating systems by 2045 (assuming 100,000 home transaction per year, 74% of which are owner occupied or private rented homes, 10% already have clean heating and 40% are exempted through being in a heat network zone). This would mean that c.40% (500,000) of remaining eligible homes would still be without a clean heating system by 2045, creating the risk of an unsustainable demand for the supply chain to meet in the run-up to the 2045 deadline. These figures are likely to be an underestimate as we have not allowed for the reducing impact of the regulation over time as some homes are bought and sold much more regularly than others.” - WWF Scotland

Some others agreed as they thought that it would allow the transition to happen more gradually, thereby not overwhelming suppliers and tradespeople and allowing technological development spurred by market growth.

Many, mostly individuals, raised overarching themes that do not relate specifically to the question. These are expanded upon in the overarching themes chapter and included concerns about the availability of effective and affordable technology, concerns about the cost of the transition for many households, general criticism of the Scottish Government’s approach and highlighting the importance of the legislation in general to help mitigate the effects of climate change.