This discussion paper is intended to support engagement on a Just Transition Plan for the Built Environment and Construction sector. The draft Plan will be published in late 2023/early 2024. The targeted action plan and route map will outline the key steps to delivering a fair transition for the sector.
To reach net zero, our approach to the built environment will transform over the coming years. This will have consequences for both new and existing structures and require greater consideration of the lifecycle of buildings and building fabric performance. It will change the way we approach planning and design, the choices we make about construction materials and methods, operation (through power and heating etc), ongoing maintenance and the way we subsequently re-purpose buildings/materials and the place they've occupied.
The built environment and construction sector currently accounts for around 40% of our emissions in Scotland. The sector will underpin the delivery of our net zero future throughout Scotland, delivering our homes, schools, hospitals and workplaces. Construction accounted for £6.6 billion of Gross Value Added (GVA) in 2020, 8.1% of Scotland's total GVA. With a turnover of £17 billion (8.2% of Scotland's total) in 2020, the sector provided employment to 158,000 people in 2021. This will be the engine of our transition, delivering the necessary revolution in retrofit and buildings fit for the future.
A focus on standards in the construction sector will be critical for emissions reductions, sustainability, climate resilience and, crucially, for attracting the skilled and diverse workforce required to deliver these.
The net zero transformation will impact on a number of areas such as skills, supply chains and our manufacturing sector. It will affect communities and businesses across Scotland.
The Built Environment and Construction Just Transition Plan will be about identifying the particular challenges and barriers faced by different sections of society to make the changes needed to reach net zero and ensuring that our approach responds to these adequately. We need your input to make sure we are considering all aspects of the transition.
The scale of change needed across our built environment is significant: the aim of this paper is to be concise and accessible rather than all encompassing. And we are also setting out to avoid duplication with other existing work. For example, decarbonising the way we heat buildings is critical for net zero and has considerable overlap with energy efficiency and retrofit activity. As heat demand will be covered in the Energy Strategy and Just Transition Plan, a draft of which was published in January, we have not included it within this paper. Given that a discussion of heat decarbonisation could sit in both of the just transition plans, we would welcome views on where it should sit in the final drafts. Access to affordable, sustainable, comfortable housing is another area of critical significance that is not directly dealt with here. We appreciate there are consumer issues around both heat demand and housing stock and it would be helpful to further understand through our engagement the extent to which the final drafts of our Just Transition Plans should consider these.
Which Just Transition Plan should heat decarbonisation be addressed in?
State of the sector
Climate action offers an opportunity to reduce inequalities in our society. As the Just Transition Commission has recommended, we must identify the existing sector inequalities and seek to redress these.
Women and ethnic minorities, in particular, are underrepresented in the sector. In 2021, total employment in the construction sector was 158,000, equivalent to 6 per cent of all jobs in Scotland. Of these 84.6% identified as men, 37.3% were over 50 years of age (compared with 33.3.% for Scotland as a whole) and 1.6% of workers were from minority ethnic backgrounds (compared with 4.3% of minority ethnic workers in Scotland as a whole).
The Construction Data Dashboard, developed in partnership with the Construction Leadership Forum, has collated data in an attempt to more fully capture the workforce of industries in, or significantly influenced by, construction. This suggests the total number of those employed within the sector (in 2019) to be 332,250, equivalent to an estimated 12.5% of Scotland's workforce.
The UK has the oldest housing stock in Europe. The most recent findings of the Scottish House Condition Survey from 2019 gives an overview of our housing stock. In relation to Energy Performance Certificates, which provide an indication of energy efficiency, 45% of Scottish homes were rated as EPC band C or better and half had an Energy Efficiency Rating of 67 or higher. Currently, 89% of homes in the social rented sector meet the requirements of the first Energy Efficiency Standard for Social Housing (EESH). Levels of insulation (both loft and wall) are also higher in the social sector compared to the private sector and 55% of homes in the private sector have wall insulation compared to 70% in the social sector. Older households (63.2%) have lower average EER ratings than families (67.7%) and other (adults without children) households (64.7%). The average energy efficiency profile of rural properties is lower than that for urban areas.
Our homes also need to be adapted for a changing climate. Currently, 280,000 homes are at risk of flooding in Scotland. There is less available data on susceptibility to high temperatures, although it is estimated that 20% of homes in the UK as a whole are already overheating and 30% of flats. This could be a particular problem for Scotland where 38% of the population live in flats. The diversity of building stock and the challenges this may present in delivering retrofit solutions will also need to be considered. For instance, households living in tenement properties tend to be smaller than the average household in Scotland, with a higher proportion of single-person households.
They also tend to have a higher proportion of households in the 25-34 age group compared to the general population in Scotland and a higher proportion of households in lower income groups.
Recent increases in energy prices have made an already difficult situation more challenging. In 2019, 25% of Scottish households were already in fuel poverty. With the Energy Price Guarantee set at £2,500 and the Energy Bills Support Scheme ending, we forecast that there will be around 920,000 fuel poor households in Scotland – 37% of all households – from April to June 2023. We estimate that around 720,000 households are in extreme fuel poverty from April 2023. This equates to 29% of all households. There are also geographical differences to this: fuel poverty is higher in remote rural areas (43% of households) and remote small towns (34%).
Improving our building stock could help to tackle these inequalities and offers multiple benefits to residents. There is a clear evidencable link between health inequalities and cold and damp homes. More energy efficient homes not only have the potential to save consumers money on energy bills, but improve levels of comfort and indoor air quality, providing wider health and wellbeing benefits.
A fair distribution of costs and benefits
Delivering a just transition for the built environment and construction sector must be underpinned by a fair distribution of the costs and benefits. Ensuring everyone is able to enjoy the benefits of warmer, dryer, homes will be a key indicator of progress.
We know that transforming our built environment presents particular challenges for different groups and we know that people have different abilities to pay for the changes that will be needed. For example:
Homeowners: In the first instance, there is a need to improve customers' understanding of retrofit options and to remove barriers for consumers. This will include tackling deterrents, such as cosmetic issues caused by retrofit activity and identifying interventions that incentivise action.
Private Rented Sector: We know that a higher proportion of private rented housing has a lower EPC rating compared to social housing and owner-occupied homes. Mechanisms need to encourage landlords to upgrade properties in a way that ensures costs are not unfairly passed onto tenants.
Non-Domestic Properties: Supporting businesses in Scotland will require specific types of interventions that encourages conversion of estates in a way that does not jeopardise productivity or profitability.
Public Sector & Housing Associations: The Scottish Government has a strong track record of providing support and investment to local authorities to tackle fuel poverty and improve energy efficiency, as part of a local area based approach. There is scope for local authorities to build upon these successful schemes and projects, exploring the potential of social housing as a pipeline to kickstart the market in retrofit.
Communities: We need to make sure communities are supported to carry out retrofit and build better places. This includes ensuring that traditionally 'disengaged' communities are able to access support. We also know that island communities may face particular challenges in accessing the workforce and materials required to makes changes to their built environment.
A fair distribution of costs and benefits will be a key consideration throughout all of our just transition plans. As discussed in further detail in Section 7, we will develop a set of indicators to monitor our progress and understand the risks and opportunities of our actions.
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